USD Index regains the smile and the 113.00 barrier

• The index rose to 4-day highs near 113.15 on Friday.
• There is no respite for the rally in US yields across the curve.
• Fedspeak, Monthly Budget Statement next in the calendar.

The USD Index (DXY), which gauges the greenback vs. a basket of its main competitors, manages to regain upside traction and surpasses the 113.00 mark at the end of the week.

USD Index supported by yields

The index maintains the recovery from weekly lows near 111.80 (October 18) well in place and looks to extend the upside momentum further north of the 113.00 hurdle on Friday.

The bounce in the dollar comes in tandem with the continuation of the rally in US yields, which navigate in multi-year peaks across the curve and always underpinned by expectations of a tighter-for-longer stance from the Federal Reserve.

In the US docket, NY Fed J.Williams (permanent voter, centrist) will speak later in the NA session followed by the release of the Monthly Budget Statement.

What to look for around USD

The dollar probes once again the area above the 113.00 mark at the end of the week.

In the meantime, 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 continues to prop up the underlying positive tone in the index.

Looking at the more macro scenario, the greenback also appears bolstered 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: Monthly Budget Statement (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 of a recession in the next months. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is gaining 0.18% at 113.05 and faces the next up barrier at 113.88 (monthly high October 13) followed by 114.76 (2022 high September 28) and then 115.32 (May 2002 high). On the other hand, the breakdown of 110.05 (weekly low October 4) would open the door to 109.35 (weekly low September 20) and finally 107.68 (monthly low September 13).