US Dollar Index advances further and prints new highs near 110.70

• The index adds to the recent breakout of the 110.00 mark.
• Fed’s tightening expectations continue to prop up the dollar.
• Fedspeak, Balance of Trade, Beige Book next on tap.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main rivals, extends the upside and prints new highs around 110.70 on Wednesday.

US Dollar Index supported by yields, Fed

The index trades with gains for the third consecutive session and widens the positive streak for the fourth week in a row, always underpinned by expectations of further tightening by the Federal Reserve.

Higher US yields across the curve have been also bolstering the uptrend in the dollar along with positive results from key fundamentals and a solid pace of job creation, all amidst the persistent tightness in the labour market.

Later in the NA session, MBA Mortgage Applications is due in the first turn seconded by Balance of Trade and the Fed’s Beige Book. In addition, St.Louis Fed T.Barkin (2024 voter, centrist), Cleveland Fed L.Mester (voter, hawk) and Vice Chair L.Brainard (permanent voter, dove) are all due to speak.

What to look for around USD

The index keeps the bullish outlook well in place and advances to fresh tops north of the 110.00 mark so far on Wednesday.

Bolstering the dollar’s strength appears the firmer conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market. This view was reinforced by Chair Powell’s speech at the Jackson Hole Symposium.

Extra volatility in the dollar, however, should not be ruled out considering the ongoing debate around the size of the September’s interest rate hike by the Federal Reserve amidst the ongoing data-dependent stance in the Fed.

Looking at the more macro scenario, the greenback appears propped up by the Fed’s divergence vs. most of its G10 peers in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: MBA Mortgage Applications, Balance of Trade, Fed Beige Book (Wednesday) – Initial Claims, Consumer Credit Change, Fed Powell (Thursday) – Wholesale Inventories (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation over a recession in the next months. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

US Dollar Index relevant levels

Now, the index is advancing 0.25% at 110.52 and a break above 110.69 (2022 high September 5) would aim for 111.90 (weekly high September 6 2002) and then 113.35 (weekly high May 24 2002). On the other hand, the next contention turns up at 107.58 (weekly low August 26) seconded by 107.01 (55-day SMA) and then 104.63 (monthly low August 10).