US Dollar Index leaps to daily highs around 104.70, ahead of Powell, data

• DXY moves higher following poor PMI data in the euro area.
• US yields extend the weekly corrective downside on Thursday.
• Weekly Claims, Flash PMIs, Powell’s testimony next on tap.

The greenback, when tracked by the US Dollar Index (DXY), regains the smile and advances to daily highs around 104.70 on Thursday.

US Dollar Index focused on data and Powell

The index so far reverses part of the recent weakness and manages to revisit the 104.70 region in the second half of the week.

Indeed, poor prints from flash PMIs in the central euro area for the month of June sparked a sell-off in the risk complex and lent legs to the buck amidst further retracement in the US yields across the curve.

Later in the NA session, usual Initial Claims are due seconded by advanced June PMIs and the weekly report on US crude oil inventories by the EIA. In addition, Chief Powell will testify again, this time before the House of Representatives.

What to look for around USD

The index seems to have embarked on a consolidation theme with the upper end limited around 105.00 for the time being.

The dollar, in the meantime, remains well supported by the Fed’s divergence vs. most of its G10 peers (especially the ECB) in combination with bouts of geopolitical effervescence, higher US yields and a potential “hard landing” of the US economy, all factors supportive of a stronger dollar in the next months.

Key events in the US this week: Initial Claims, Flash PMIs, Powell’s Semiannual Testimony (Thursday) – Final Consumer Sentiment (Friday).

Eminent issues on the back boiler: Hard, soft, softish 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 0.39% at 104.59 and a break above 104.94 (weekly high June 22) would expose 105.78 (2022 high June 15) and then 107.31 (monthly high December 2002). On the downside, the next support aligns at 103.41 (weekly low June 16) seconded by 102.70 (55-day SMA) and finally 101.29 (monthly low May 30).