US dollar index DXY extends rally and hits new cycle highs near 104.50

• The DXY index is moving higher and remains supported by risk aversion sentiment.
• Bond demand drags US yields lower.
• Weekly jobless claims and product prices stand out on today’s economic calendar.

The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, accelerates your gains and hits new cycle highs near 104.50 during the European session on Thursday.

DXY index strengthens on risk aversion

The DXY index picks up the pace and extends rally to levels last seen in December 2002around 104.40/50, against the backdrop of rising risk aversion in global markets.

Besides, the feeling of risk aversion The prevailing trend supports new inflows into bond markets and puts yields under further downward pressure along the curve, at a time when investors remain assessing the latest US inflation figures against recent Federal Reserve statements and the prospects for a further tightening of it.

Regarding the US data, the usual initial jobless claims and the producer price index for the month of April will be published at the beginning of the American session today.

What can we expect around the USD

The dollar continues its upward movement and reaches new highs near 104.50. This time, the move appears to be underpinned by a resurgence of risk aversion, which in turn appears to be bolstered by geopolitical concerns. Also supporting the dollar is investor expectations of a Federal Reserve rate tightening and its correlation with yields, the current high inflation narrative, and strong labor market health. 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 up 0.17% on the day, trading at 104.18. A break above 104.43 (12 May highs), would open the door to 105.00 (round level) and 105.63 (11 Dec 2002 highs). Elsewhere, immediate support appears at 102.35 (low May 5), followed by 99.81 (low Apr 21) and 99.57 (low Apr 14).