US Dollar Index retreats from weekly top on softer yields

• DXY snaps five-day uptrend, refreshes intraday low at the latest.
• Yields ease as virus-linked optimism fades, geopolitical tensions erupt.
• Financial market risk from China adds strength to the sour sentiment.

US Dollar Index (DXY) steps back from the week’s high, pressured around intraday low near 96.25 during Wednesday’s Asian session. The greenback gauge tracks US Treasury yields to the south amid fresh challenges to the market sentiment, as well as due to the absence of major catalysts at home.

Recently probing market optimists are the geopolitical headlines concerning the rift between the Washington and Kremlin, as well as the US-China tussles. Adding to the market fears could be the doubts over Chinese real-estate giants.

Russian refrain to make peace with Ukrain irritates the US as President Joe Biden warns Russian counterpart Vladimir Putin of sanctions and helps Ukraine with military power if Kremlin invades Kyiv. “The Biden administration is in ‘intensive consultations’ with the new German government over its response if Russia invades Ukraine and believes Germany would be ready to take significant action if Russia launches an attack, a senior U.S. State Department official said on Tuesday,” said Reuters.

On a different page, the US boycott of the 2022 Beijing Olympics doesn’t bode well with China as the dragon nation hints at consequences for America due to the same, per Chinese media. Additionally, the market’s optimism also fades amid doubts over China’s struggling real-estate firms’, Evergrande and Kaisa, capacity to pay the looming debt after barely paying the interests.

Alternatively, receding fears of the South African coronavirus variant, dubbed as Omicron keeps markets hopeful.

Amid these plays, the US 10-year Treasury yields snap two-day uptrend around 1.47%, down two basis points (bp), whereas S&P 500 Futures struggle to follow its Wall Street benchmark that rallied the most since March.

It’s worth noting that the mixed second-tier data from the US also weigh on the DXY ahead of the key US Consumer Price Index (CPI) for November, up for publishing on Friday. Before that, the risk catalyst is important to determine near-term US Dollar Index moves.

Technical analysis

Despite the latest pullback, DXY bulls remain hopeful until the quote drops below the six-week-old support line near 94.90.