US Dollar Index moves to daily highs past 95.80

• DXY regains upside traction and surpasses 95.80.
• US yields tick higher and support the upside in the index.
• FOMC’s Waller, Clarida scheduled to speak later in the session.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, manages to regain buying interest and returns to the area above 95.80 on Friday.

US Dollar Index up on US yields

After two consecutive daily pullbacks, the index finally manages to regain the smile and revisit the upper-95.00s at the end of the week. So far, the 95.50 area have emerged as quite a firm contention.

The recovery in the dollar comes amidst a better tone in the US money markets, where yields now attempt a mild recovery along the curve.

In the meantime, inflation concerns continue to dominate the FX scenario in the global markets, as well as prospects of an anticipated start of the tightening cycle by the Federal Reserve. On the latter, FOMC’s J.Williams suggested on Thursday than expectations for future increases of consumer prices remain on the rise while US inflation appears more broad-based.

No data releases in the US calendar on Friday should leave the attention to speeches by FOMC’s permanent voters R.Clarida (dovish) and C.Waller (centrist).

What to look for around USD

The index met decent support around 95.50 on Thursday after being rejected from new cycle highs further north of the 96.00 barrier on the previous session. The intense move higher in the buck remains well underpinned by the “higher-for-longer” narrative around current elevated inflation, which in turn lend wings to US yields and bolster speculations of a sooner-than-estimated move on interest rates by the Federal Reserve, probably at some point in H2 2022. Further support for the dollar comes in the form of the solid recovery in the labour market, Biden’s infrastructure bill and positive results in US fundamentals.

Eminent issues on the back boiler: US-China trade conflict under the Biden’s administration. Debt ceiling issue. Geopolitical risks stemming from Afghanistan.

US Dollar Index relevant levels

Now, the index is advancing 0.33% at 95.83 and a break above 96.24 (2021 high Nov.17) would open the door to 97.00 (round level) and then 97.80 (high Jun.30 2020). On the flip side, the next down barrier emerges at 94.96 (weekly low Nov.15) followed by 94.56 (monthly high Oct.12) and finally 93.87 (weekly low November 9).