US Dollar Index gives signs of life near 103.00

• DXY looks to regain the 103.00 mark and beyond.
• US yields trade in a mixed performance on Friday.
• No US data releases scheduled at the end of the week.

The greenback, when measured by the US Dollar Index (DXY), trades with marginal gains in the vicinity of the 103.00 mark at the end of the week.

US Dollar Index looks to risk trends

Following Thursday’s deep pullback to 2-week lows in the sub-103.00 region, the index now looks to regain some ground lost amidst the mixed note in the US cash markets and the absence of a clear direction in the broad risk appetite trends.

Indeed, yields in the short end of the US curve are marginally up vs. the still inconclusive price action in the belly and the long end, all within the generalized side-lined theme in place since the beginning of May.

In the meantime, investors remain vigilant on the possibility of a “hard landing” of the US economy amidst elevated inflation and the Fed’s more aggressive tightening of its monetary conditions.

On the latter, and according to CME Group’s FedWatch Tool, the probability of a 50 bps rate hike at the June 13 meeting is at 93% and 85% when it comes to the July 27 event.

The absence of data releases in the US calendar on Friday should leave all the attention to the progress of the broad risk appetite trends.

What to look for around USD

The dollar attempts a mild rebound to the 103.00 neighbourhood following the multi-session drop recorded on Thursday. In the meantime, and 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.

Eminent issues on the back boiler: Speculation of a “hard landing” of the US economy. Escalating geopolitical effervescence vs. Russia and China. Fed’s more aggressive rate path this year and 2023. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is gaining 0.04% at 102.91 and the breakout of 105.00 (2022 high May 13) would open the door to 105.63 (high December 11 2002) and finally 106.00 (round level). On the other hand, the next support lines up at 102.65 (weekly low May 19) followed by 102.35 (low May 5) and then 99.81 (weekly low April 21).