US Dollar Index DXY Extends Correction Below 104.00 Awaiting Powell and Data

• DXY breaks below 104.00 amid risk appetite.
• US yields recover some of the ground lost on Tuesday.
• President Powell and retail sales stand out on today’s economic calendar.

The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, continues its downward correction and breaks key support at 104.00 during the European session on Tuesday.

DXY Index focuses on Powell and the data

The DXY index gives ground for the third consecutive session on Tuesday and further extends the rejection from the 19-year highs, reached last week around the 105.00 region (May 13).

The marked downward movement of the dollar occurs amid a further improvement in appetite for riskier assetswhich is also reflected in the attempt to rise in US yields along the curve.

Meanwhile, investors will closely watch the President Powell’s speech at the Wall Street Journal’s Future of Everything Festival in New York. Furthermore, the publication of retail sales April will take center stage on today’s economic calendar.

What can we expect around the USD

So far this month, the DXY index found decent initial resistance at the 105.00 area, triggering a moderate downside correction. Supporting the dollar comes from investors’ expectations of a tighter rate path from the Federal Reserve and its correlation with yields, the current narrative of high inflation, and the strong health of the US labor market. In the negative aspects for the dollar appear the incipient speculations of a “hard landing” of the US economy as a consequence of the more aggressive normalization of the Fed.

Relevant DXY US Dollar Index Levels

At time of writing, the DXY index is down 0.39% on the day, trading at 103.78. A break above 105.00 (13th May high), would open the door to 105.63 (11th Dec 2002 high) and 106.00 (round level). Elsewhere, immediate support appears at 102.35 (low May 5), followed by 99.81 (low Apr 21) and 99.57 (low Apr 14).