US dollar index DXY extends lower and challenges multi-day lows near 99.60

• The DXY index extends Wednesday’s losses below the 100.00 level.
• US yields extend corrective decline from recent highs.
• Data for retail sales, initial jobless claims and the University of Michigan consumer sentiment index stand out on today’s US economic calendar.

The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, extends Wednesday’s decline and returns to the region of 99.60/50 Thursday.

DXY index puts the spotlight on the data and the ECB

The DXY index loses ground for the second day in a row on Thursday after hitting a new cyclical high around 100.50 the day before.

The corrective fall of the dollar occurs after another pullback in US yieldswhich extend losses after hitting recent highs, as investors continue to digest the latest inflation data amid growing speculation that consumer price gains could be close to peaking.

Turning to US data, retail sales, initial jobless claims and the University of Michigan consumer sentiment index will be released today.

What can we expect around the USD

The DXY index’s upside move faltered around 100.50 earlier in the week and is under pressure along with the pullback in US yields across the curve. So far, the very short-term price action in the dollar remains dictated by geopolitics, while the case for a stronger dollar in the medium/long term remains well supported by the current narrative of high inflation, a possible more aggressive Fed tightening stance and the strong performance of the US economy.

Relevant DXY US Dollar Index Levels

At time of writing, the DXY index is down 0.22% on the day, trading at 99.62. A break above 100.55 (14 May 2020 high), would target 100.86 (24 Apr 2020 high) and 100.93 (11 Apr 2020 high). On the other hand, next support appears at 97.68 (30 Mar low), followed by 99.96 (100-day SMA) and 95.67 (16 Feb low).