US Dollar Index eyes weekly gains below 107.00 on Fed comments, upbeat Treasury yields

• US Dollar Index steadies around three-month low, pares the biggest weekly loss since October 2020.
• Fed policymakers defend hawkish trajectory, pay little heed to recently mixed second-tier data.
• US 10-year Treasury yields bounce off six-week low.
• Risk-off mood, a light calendar can keep buyers hopeful.

US Dollar Index (DXY) treads water around 106.70 as it braces for the weekly gain during Friday’s Asian session. That said, the greenback’s gauge versus the six major currencies cheered a recovery in the US Treasury yields amid hawkish comments from the Federal Reserve (Fed) officials to snap a two-day downtrend on Thursday.

As per the latest Reuters poll of economists, “The Federal Reserve will downshift in December to deliver 50 basis points (bps) interest rate hike, but a longer period of US central bank tightening and a higher policy rate peak are the greatest risks to the current outlook.”

The survey justifies the latest Fedspeak as St. Louis Federal Reserve President James Bullard said on Thursday that the US Federal Reserve's (Fed) monetary policy is not yet in a range estimated to be sufficiently restrictive to reduce inflation. On the same line, Minneapolis Federal Reserve Bank President Neel Kashkari said, “With inflation still high but a lot of monetary policy tightening already in the pipeline, it's unclear how high the US central bank will need to raise its policy rate.”

It should be noted that the DXY’s recent sluggishness could be linked to the mixed data on Thursday. However, the firmer prints of the top-tier US Retail Sales and inflation numbers, published earlier, keep the greenback buyers hopeful.

Talking about the previous day’s data, US Philadelphia Fed Manufacturing Index fell to -19.4 versus -6.2 market forecasts and -8.7 prior. Further, Housing Starts declined by 4.2% MoM in October following September's 1.3% contraction whereas Building Permits fell by 2.4%, compared to a 1.4% increase recorded in the previous month. Additionally, the Jobless Claims eased to 222K for the week ended on November 11 versus 225K expected and upwardly revised 226K prior.

With this, the benchmark US 10-year Treasury yields bounced off a six-week low before staying mostly unchanged at 3.77% by the press time.

In addition to the Fedspeak and bond yields, fresh tension between Russia and Ukraine due to missile strikes on Poland, as well as the increasing Covid counts in China also underpins the US Dollar’s safe-haven demand.

Looking forward, US Existing Home Sales for October, expected 4.38M versus 4.71M prior, decorates the light calendar but major attention will be given to the risk catalysts for clear directions.

Technical analysis

Nearly oversold RSI (14) joins the DXY’s dribbling beyond the 200-DMA, around 105.95, to tease the bulls.