US Dollar Index traces softer yields below 106.00, Fed Minutes eyed

• US Dollar Index fades Friday’s corrective pullback from a six-week low.
• US Treasury bond yields remain pressured as Fed hawks resist welcoming softer inflation data.
• Fears of recession in Eurozone, US-China tussles also fail to propel DXY ahead of Wednesday’s FOMC Minutes.

US Dollar Index (DXY) takes offers to reverse Friday’s recovery moves, down 0.07% intraday near 105.60 during Monday’s Asian session. In doing so, the greenback’s gauge follows the US Treasury bond yields amid a sluggish session.

That said, the US 10-year Treasury yields remain pressured at around 2.84% after posting the weekly losses by the end of Friday.

It should be noted that the weakness in yields could be linked to the market’s fears of economic growth despite recently softer US inflation data, mainly due to the hawkish comments from the Fed policymakers and the energy crisis in Europe.

During the last week, softer prints of the US Consumer Price Index (CPI) and the Producers Price Index (PPI) managed to ease the market’s inflation fears. Even so, Richmond Federal Reserve (Fed) Bank President Thomas Barkin said on Friday that he wants to raise interest rates further to bring inflation under control. The policymaker further added that he will watch the US economic data to decide how big a rate hike to support at the Fed's next meeting in September. "I'd like to see a period of sustained inflation under control, and until we do that I think we are just going to have to move rates into restrictive territory," Barkin told CNBC, per Reuters.

Previously San Francisco Fed President Mary Day backed opportunities of witnessing another 75 basis points (bps) of a rate hike in September, while also suggesting an upfront 0.50% rate hike to be sure. Also, Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans sounded grim. That said, Fed’s Kashkari mentioned that he hasn't "seen anything that changes" the need to raise the Fed's policy rate to 3.9% by year-end and to 4.4% by the end of 2023. Further, Fed policymaker Evens stated, “The economy is almost surely a little more fragile, but would take something adverse to trigger a recession.” Fed’s Evans also called inflation "unacceptably" high.

Elsewhere, a probable meeting between US President Joe Biden and his Chinese counterpart Xi Jinping, as signaled by the Wall Street Journal (WSJ), appeared to have favored the risk-on mood. Also positive for the mood were headlines suggesting improved coronavirus conditions in China's financial hub Shanghai. However, the increased count of the US lawmakers who is visiting Taiwan challenges the sentiment.

Against this backdrop, S&P 500 Futures print 0.25% intraday losses while Japan’s Nikkei 225 rises 0.65% on a day by the press time. It’s worth noting that Wall Street rallied on Friday.

Moving on, DXY traders may pay attention to Monday’s Empire State Manufacturing PMI for August for fresh impulse. However, major attention will be given to the Federal Open Market Committee (FOMC) Minutes.

Technical analysis

US Dollar Index rebound remains elusive unless crossing a monthly resistance line, around 106.15 by the press time.