US Dollar Index battles to keep gains around 104.50

• DXY trades within slight gains in the mid-104.00s.
• US yields navigate within a mixed note on Monday.
• NY Empire State Index, TIC Flows, short-term Bill Auctions next on tap.

The US Dollar Index (DXY), which gauges the greenback vs. a basket of its main competitors, trades within a tight range around the 104.50 region at the beginning of the week.

US Dollar Index looks to risk trends, Fed

The index extends the side-lined trading into the European session on Monday around the 104.50 region amidst the mixed performance of US yields along the curve and alternating risk appetite trends.

In the US money market, yields in the short end of the curve attempt a mild bounce vs. the soft start of the week seen in the belly and the long end.

No news in the more macro scenario for the dollar so far, as geopolitical tensions remain on the rise, particularly after Sweden and Finland expressed their intentions to join the NATO in the very near term.

Investors, in the meantime, remain focused on the Fed plans to tighten further its monetary conditions in the next few months and in 2023.

Later in the NA session, the NY Empire State Index is due seconded by TIC Flows and a 3-month/6-month Bill Auctions. In addition, NY Fed J.Williams (permanent voter, centrist) is also due to speak.

What to look for around USD

The dollar met an initial decent resistance in the 105.00 neighbourhood so far this month. Supporting the buck appears investors’ expectations of a tighter rate path by the Federal Reserve and its correlation to yields, the current elevated inflation narrative and the solid health of the labour market. On the negatives for the greenback turn up the incipient speculation of a “hard landing” of the US economy as a result of the Fed’s more aggressive normalization.

Key events in the US this week: NY Empire State Manufacturing Index, TIC Flows (Monday) – Retail Sales, Industrial Production, Business Inventories, NAHB Index, Fed Powell (Tuesday) – MBA Mortgage Applications, Building Permits, Housing Starts (Wednesday) – Initial Claims, Philly Fed Manufacturing Index, Existing Home Sales, CB Leading Index (Thursday).

Eminent issues on the back boiler: Speculation of a “hard landing” of the US economy. Escalating geopolitical effervescence vs. Russia and China. Fed’s more aggressive rate path this year and 2023. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is 0.10% at 104.58 and a breakout of 105.00 (2022 high May 13) would open the door to 105.63 (high December 11 2002) and finally 106.00 (round level). On the other hand, initial contention emerges at 102.35 (low May 5) seconded by 99.81 (weekly low April 21) and then 99.57 (weekly low April 14).