The Dollar Index continues to advance and approaches 107.00

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  • Improving dollar sentiment lifts the index close to 107.00.
  • US yields remain subdued after the post-Minutes advance.
  • Weekly jobless claims figures, the Philadelphia Fed index and housing data will be released later.

The Dollar Index (DXY)which measures the greenback against a set of its main rivals, continues Wednesday’s advance and flirts with the 107.00 area on Thursday.

The Dollar Index is pending the data

The index is trading in positive territory for the second consecutive session so far on Thursday, thus extending the weekly rebound after bottoming at the 104.60 area the previous week.

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The recovery of the dollar continues to point to the 107.00 barrier, amid low yields in the United States, as market participants continue to digest the release of Wednesday’s FOMC minutes.

It is worth remembering that the FOMC minutes reiterated that the Fed’s policy remains dependent on the data, at a time when members expressed concern about the possibility of inflation taking hold and suggested adopting a more restrictive stance. Some participants were also concerned about the effects of likely overtightening.

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Busy day on the US docket, as usual, Initial Jobless Claims will be released first, seconded by Philadelphia Fed Manufacturing Index, CB Leading Index, Existing Home Sales and speeches Kansas City Fed President Esther George (voter, hawk) and Minneapolis Fed Chief Neel Kashkari (2023 voter, centrist).

What to expect from the dollar

The strong rebound of the dollar responds to a certain worsening of the conditions in the risk complex, which motivates the DXY to refocus its attention on the 107.00 area.

Meanwhile, the dollar could see more volatility as investors assess the Fed’s next move, namely a 50 or 75 basis point hike in September.

From a macroeconomic point of view, the dollar appears to be supported by the Fed’s divergence from most of its G10 peers (especially the ECB), combined with bouts of geopolitical turmoil and the occasional resurgence of risk aversion.

Relevant levels of the Dollar Index

At time of writing the index is gaining 0.25% at 106.93 and a break of 107.42 (post-FOMC weekly high on Jul 27) would expose 109.29 (2022 high of July 15) and then 109.77 (monthly maximum of September 2002).

On the other hand, the immediate support is found at 104.63 (monthly low of August 10), followed by 103.98 (100-day SMA) and finally 103.67 (weekly minimum June 27).

Source: Fx Street

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