US Dollar Index regains the smile above 94.00 ahead of US CPI

• DXY retakes some upside traction and moves above 94.00.
• US yields recover some ground across the curve.
• US CPI, weekly Claims next of note in the calendar.

The greenback, in terms of the US Dollar Index (DXY), seems to leave behind the recent weakness and retakes the area above the 94.00 barrier midweek.

US Dollar Index now looks to data

After three consecutive daily retracements, including the rejection from new 2021 highs past 94.60 (November 5), the index manages to meet some dip buyers and advance past the 94.00 hurdle ahead of the opening bell in Euroland.

The rebound in the dollar appears so far in tandem with the bounce in US yields across the curve after the front end met support near 0.40%, the belly met contention ahead of 1.40% and the decline in the key 30y bond loos contained around 1.80% for the time being.

In the meantime, global markets appear side-lined on Wednesday amidst the prevailing cautiousness ahead of the release of key inflation figures in the US economy due later in the NA session. The publication of the CPI gained relevance as of late amidst the shift in the narrative towards a more lasting elevated inflation, although consensus (among Fed-speakers) expects consumer prices to decline in 2022.

Further data includes the usual Initial Claims and Wholesale Inventories and the report on crude oil supplies by the DoE.

What to look for around USD

The leg lower in the index seems to have met some contention in the 93.90 region (November 9) following YTD tops above 94.60 (November 5). The greenback, in the meantime, continues to closely track the performance of US yields and the progress of the current elevated inflation as well as views from Fed’s rate-setters regarding the probability that high prices could linger for longer, all along the performance of the economic recovery against the backdrop of unabated supply disruptions and the equally incessant raise in coronavirus cases.

Key events in the US this week: October CPI, Initial Claims (Wednesday) – Flash November Consumer Sentiment (Friday).

Eminent issues on the back boiler: US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. Debt ceiling debate. Geopolitical risks stemming from Afghanistan.

US Dollar Index relevant levels

Now, the index is gaining 0.09% at 94.07 and a break above 94.62 (2021 high Nov.5) would open the door to 94.74 (monthly high Sep.24 2020) and then 95.00 (round level). On the flip side, the next down barrier emerges at 93.87 (weekly low November 9) seconded by 93.48 (55-day SMA) and finally 93.27 (monthly low October 28).