US Dollar Index struggles for direction near 96.00

• DXY alternates gains with losses around 96.00.
• US yield rebound across the curve on Thursday.
• Initial Claims, Fedspeak next on tap in the US docket

The greenback, when tracked by the US Dollar Index (DXY), follows the generalized side-lined mood in the global markets around the 96.00 neighbourhood on Thursday.

US Dollar Index looks to data, yields, omicron

The index trades without a clear direction in the second half of the week, falling in line with the broad-based range bound theme prevailing in the global markets and amidst persistent caution surrounding the progress of the omicron variant.

In the meantime, US yields manage to pick up some upside traction and reverse part of the recent weakness. That said, the front end of the curve approaches 0.60%, the belly flirts with the 1.50% zone and the long end trades closer to 1.80%.

In the calendar, the usual weekly Initial Claims will be the salient event on Thursday seconded by Challenger Job Cuts. In addition, FOMC’s R.Quarles (permanent voter, centrist), Richmond Fed T.BARKIN (voter, centrist), Atlanta Fed R.Bostic (voter, centrist) and San Francisco Fed M.Daly (voter, hawkish) are all due to speak.

What to look for around USD

The dollar managed to bounce off recent lows in the mid-95.00s on the back of the recovery in yields and the hawkish twist from Powell’s testimony. In the meantime, the current backdrop of rising omicron concerns, fresh safe haven demand, the “higher-for-longer” narrative around current elevated inflation and speculations of a Fed’s lift-off earlier than anticipated remain all factors supportive of the dollar for the time being.

Key events in the US this week: Initial Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Factory Orders, ISM Non-Manufacturing (Friday).

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 gaining 0.02% at 96.02 and a break above 96.93 (2021 high Nov.24) 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 95.51 (weekly low Nov.30) followed by 94.96 (weekly low Nov.15) and finally 94.44 (low Nov.18).