US Dollar Index regains the smile and targets 103.00

• DXY bounces off earlier lows in the 102.30 region.
• US yields attempt a recovery following the post-Fed drop.
• Initial Claims next of note in the US docket.

The US Dollar Index (DXY), which gauges the greenback vs. a basket of its main competitors, manages to leave behind Wednesday’s pullback and advances modestly on Thursday.

US Dollar Index remains capped by 104.00

The index reverses two consecutive daily pullbacks and retargets the 103.00 region after bottoming out near 102.30 during the Asian trading hours, as market participants continue to digest the latest FOMC event.

It is worth recalling that the Federal Reserve raised the Fed Funds Target Range (FFTR) by 50 bps as widely anticipated at its event on Wednesday. However, the Committee sounded less hawkish than expected, and this view was later reinforced by Chief Powell after he said a 75 bps rate hike was not in the Committee’s mind for the time being.

The daily uptick in the greenback appears reinforced by the so far tepid rebound in US yields after the recent weakness, particularly in the short end and the belly of the curve.

In the US data space, the only release of note will be the usual Initial Claims seconded in relevance by Challenger Job Cuts for the month of April.

What to look for around USD

The dollar looks to regain ground lost following the Fed-led decline in the wake of the FOMC gathering on Wednesday. The Fed’s more aggressive rate path continues to be the main driver behind the robust bullish stance in the dollar, which also appears reinforced by the current elevated inflation narrative and the solid health of the labour market. Collaborating with the latter appear bouts of geopolitical tensions as well as the move higher in US yields.

Key events in the US this week: Initial Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Consumer Credit Change (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is gaining 0.30% at 102.81 and the breakout of 103.92 (2022 high April 28) would open the door to 104.00 (round level) and finally 105.63 (high December 11 2002). On the other hand, the next support emerges at 102.31 (low May 5) seconded by 99.81 (weekly low April 21) and then 99.57 (weekly low April 14).