US Dollar Index looks offered around 104.60 as risk appetite improves

• DXY retreats from recent cycle peaks near 105.00.
• US yields edge higher as risk sentiment improves on Friday.
• Flash Consumer Sentiment, Fedspeak next in the docket.

The greenback, when measured by the US Dollar Index (DXY), gives away some gains and returns to the 104.60 region at the end of the week.

US Dollar Index retreats from 19-year tops

The index comes under some selling pressure on Friday against the backdrop of a mild improvement in the risk-associated universe.

Indeed, the dollar sheds some ground after hitting fresh peaks in levels last seen in December 2002 just below 105.00 the figure on Thursday. The recent sharp move higher was exclusively in response to the abrupt re-emergence of the risk aversion.

The risk-on mood is also seen in the US cash markets, as yields manage to regain some ground lost along the curve.

Later in the US calendar, May’s advanced Consumer Sentiment is due along with the speech by Minneapolis Fe N.Kashkari (2023 voter, dove).

What to look for around USD

The dollar corrects lower after climbing to the boundaries of the 105.00 mark on Thursday, or new 19-year highs. Supporting the buck appears investors’ expectations of a tighter rate path by the Federal Reserve and its correlation to yields, the current elevated inflation narrative and the solid health of the labour market. On the negatives for the greenback turn up the incipient speculation of a “hard landing” of the US economy as a result of the Fed’s more aggressive normalization.

Key events in the US this week: 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 losing 0.15% at 104.58 and faces the next support at 102.35 (low May 5) seconded by 99.81 (weekly low April 21) and then 99.57 (weekly low April 14). On the other hand, a breakout of 104.92 (2022 high May 12) would open the door to 105.00 (round level) and finally 105.63 (high December 11 2002).