US Dollar Index looks firmer, advances to new highs near 104.20

• DXY starts the week on a strong footing north of 104.00.
• Yields in the belly and the long end of the curve extend the upside.
• Wholesale Inventories, short-term Bill Auctions next on tap.

The greenback, when tracked by the US Dollar Index (DXY), adds to the recent strength and print new cycle peaks in the 104.15/20 band on Monday.

US Dollar Index looks to yields, data

The index advances for the third session in a row on Monday and extend the uptrend to an area last visited back in December 2002 near 104.20, as market participants continue to digest Friday’s Nonfarm Payrolls figures (+428K jobs) amidst the continuation of the march north in US yields.

On the latter, the key 10y benchmark note creeps higher and approaches the 3.20% area, while the 30y bond now targets the 3.30% region.

Later in the NA session, the only release of note will be the Wholesale Inventories for the month of March ahead of a 3-month and 6-month Bill Auctions. In addition, Atlanta Fed R.Bostic (2024 voter, centrist) is also due to speak.

What to look for around USD

The dollar regained its solid appeal and managed to record new highs beyond the 104.00 mark, as investors’ expectations for a tighter rate path by the Federal Reserve have been nothing but reinforced by the FOMC event on Wednesday. The constructive stance in the dollar is also underpinned by the current elevated inflation narrative and the solid health of the labour market as well as bouts of geopolitical tensions and higher US yields.

Key events in the US this week: Wholesale Inventories (Monday) – MBA Mortgage Applications, Inflation/Core Inflation Rate (Wednesday) – Producer Prices, Initial Claims (Thursday) – Flash Consumer Sentiment (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 0.36% at 104.02 and the breakout of 104.18 (2022 high May 9) would open the door to 105.00 (round level) and finally 105.63 (high December 11 2002). On the other hand, the next support emerges at 102.35 (low May 5) seconded by 99.81 (weekly low April 21) and then 99.57 (weekly low April 14).