US Dollar Index challenges 4-week lows near 97.70 ahead of data

• DXY remains under pressure around 97.70.
• US yields extend the corrective downside on Thursday.
• Weekly Claims, PCE, next of relevance in the US docket.

The greenback remains under pressure so far this week and now trades in the area of multi-week lows around 97.70 when tracked by the US Dollar Index (DXY) on Thursday.

US Dollar Index looks to Ukraine, data

The index sheds ground for the third session in a row and navigates the 97.70 region amidst a cautious stance in the broader risk appetite trends and the renewed demand for bonds.

On the latter, US yields continue to lose momentum and grind lower following recent peaks, with the US 10y benchmark down for the third consecutive session to the 2.30% region (from Friday’s peaks around 2.55%).

Regarding the geopolitical front, rising scepticism prevails in response to the apparent progress in the latest Russia-Ukraine peace talks in Turkey, which have so far lacked any meaningful follow through.

In the US data space, Initial Claims are due seconded by inflation measured by the PCE, Personal Income/Spending and the Chicago PMI. In addition, NY Fed J.Williams  (permanent voter, centrist)is also due to speak.

What to look for around USD

The index remains on the defensive and retests the initial support zone around 97.70. In the meantime, very near-term price action in the greenback continues to be dictated by geopolitics, while the case for a stronger dollar in the medium/long term remains well propped up by the current elevated inflation narrative, a potential more aggressive tightening stance from the Fed, higher US yields and the solid performance of the US economy.

Key events in the US this week: PCE Price Index, Initial Jobless Claims, Personal Income, Personal Spending (Thursday) – Nonfarm Payrolls, Unemployment Rate, Final Manufacturing PMI, ISM Manufacturing PMI (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Futures of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is down 0.05% 97 78 and a break above 99.41 (2022 high March 7) would open the door to 100.00 (psychological level) and finally 100.55 (monthly high May 14 2020). On the flip side, the next down barrier emerges at 97.68 (weekly low March 30) seconded by 97.03 (55-day SMA) and then 96.58 (100-day SMA).