US Dollar Index: Bears appear in control below 104.00

• DXY remains under pressure and breaches 104.00.
• US yields trade within a mixed fashion on Tuesday.
• Trade Balance, House Price Index, Consumer Confidence next on tap.

The greenback, in terms of the US Dollar Index (DXY), extends the downside and probes the sub-104.00 region once again on turnaround Tuesday.

US Dollar Index near multi-day lows

The index sheds ground for the third consecutive session on Tuesday and returns to the area below the 104.00 mark on the back of the continuation of the risk-on sentiment and amidst the mixed performance in the US cash markets.

In the meantime, dollar dynamics continue to look to the Fed’s planned normalization of its monetary conditions, always with the unconditional pledge to bring down inflation to the Fed’s target. On this, and according to CME Group’s FedWatch Tool, the probability of a 75 bps rate hike at the July 27 gathering is now around 92% from 0% just a month ago.

In the US data space, advanced Goods Trade Balance figures are due seconded by the FHFA’s House Price Index and the Consumer Confidence gauged by the Conference Boar.

What to look for around USD

The index succumbs to further selling pressure amidst further improvement in the appetite for the risk complex in the first half of the week so far.

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 suggesting a stronger dollar in the next months.

Key events in the US this week: Advanced Goods Trade Balance, House Price Index, CB Consumer Confidence (Tuesday) – MBA Mortgage Applications, Final Q1 GDP Growth Rate (Wednesday) – PCE, Core PCE, Personal Income, Personal Spending, Initial Claims (Thursday) – ISM Manufacturing, Final Manufacturing PMI (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 losing 0.10% at 103.83 and faces the next contention at 103.41 (weekly low June 16) seconded by 102.91 (55-day SMA) and finally 101.29 (monthly low May 30). On the other hand, 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).