US Dollar Index extends the bounce and re-targets 107.00

• The index gathers extra steam and trades in multi-session highs.
• The risk-off mood keeps bolstering the demand for the dollar.
• Housing data, Industrial Production due next in the US docket.

The greenback rises further and motivates the US Dollar Index (DXY) to trade in multi-session peaks near 106.80 on turnaround Tuesday.

US Dollar Index up on risk-off mood, looks to data

The index advances for the third session in a row and extend further the rebound from last week’s 5-week lows near 104.60, always on the back of the intense offered stance in the risk complex.

The extra improvement in the buck comes despite the muted performance of US yields, which keep hovering around Monday’s closing levels.

In the US data universe, Housing Starts and Building Permits are due later seconded by Industrial Production and the weekly report on US crude oil inventories by the API.

What to look for around USD

The strong rebound in the dollar comes in response to some worsening conditions in the risk complex, which motivates DXY to now shift its attention to the 107.00 neighbourhood.

The dollar, in the meantime, is poised to suffer some extra volatility amidst investors’ repricing of the next move by the Federal Reserve, namely a 50 bps or 75 bps hike in September.

Looking at the macro scenario, the dollar appears propped up by the Fed’s divergence vs. most of its G10 peers (especially the ECB) in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: Building Permits, Housing Starts, Industrial Production (Tuesday) – MBA Mortgage Applications, Retail Sales, Business Inventories, FOMC Minutes (Wednesday) – Initial Claims, Philly Fed Manufacturing Index, CB Leading Index, Existing Home Sales (Thursday).

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.

US Dollar Index relevant levels

Now, the index is gaining 0.07% at 106.55 and a breakout of 107.42 (weekly high post-FOMC July 27) would expose 109.29 (2022 high July 15) and then 109.77 (monthly high September 2002). On the other hand, immediate support comes at 104.63 (monthly low August 10) seconded by 103.80 (100-day SMA) and finally 103.67 (weekly low June 27).