- The DXY index remains firm around the 99.00 level supported by geopolitical jitters.
- US yields regain some composure through the curve on Monday.
- Market attention remains focused on developments in Ukraine.
The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, further extends the upward movement and breaks the 99.00 level barrier during the European session on Monday.
DXY index strengthens on risk aversion
The strong rise in the DXY index remains strong for the third day in a row and reaches levels last traded at the end of May 2020.
The continuation of the move higher in the dollar is still good underpinned by worsening conditions in the military conflict between Russia and Ukraine and strong sentiment around risk aversion.
Furthermore, the dollar’s rally so far comes on the back of a timid rebound in US yields after recent weakness and sharp curve flattening.
When it comes to US data, the only release today will be the consumer credit change for January.
What can we expect around the USD
The DXY index has made new cyclical highs above the 99.00 barrier earlier in the week, all in response to heightened geopolitical concerns in Ukraine. Persistent safe haven bias is expected to continue to support the dollar and in the current environment for now. Risk-off sentiment aside, the constructive view on the dollar remains supported by currently high inflation, as well as the likelihood of a more aggressive start to normalizing monetary conditions by the Fed. Aggressive messages from the BoE and the ECB have the potential to weigh on the expected upward movement in the dollar in the coming months.
Relevant DXY US Dollar Index Levels
At time of writing, the DXY index is gaining 0.44% on the day, trading at 98.94. A break above 99.21 (7 Mar high), would open the door to 99.97 (25 May 2020 high) and 100.00 (psychological level). On the other hand, the next support appears at 97.44 (28 Jan high), followed by 96.17 (55-day SMA) and 95.67 (16 Feb low). Relevant US Dollar Index Levels
Source: Fx Street