- The DXY index bounce was unable to close above the 99.00 level.
- US yields regain some composure on Tuesday.
- ISM Services PMI and Markit Services PMI stand out on today’s economic calendar.
The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, faces some downside pressure near the 99.00 region in a change of course on Tuesday.
DXY Index focuses attention on geopolitics, Fed and data
After three consecutive daily gains, the dollar’s upside momentum seems to have run out around the key 99.00 barrier on Tuesday.
In the meantime, US yields resume rising albeit at a gradual pace amid growing caution among investors following the recent inversion of the yield curve.
The absence of new news about the war in Ukraine, as well as the no progress from peace talks Current exchanges between the two seem to limit the fall of the DXY index for the time being, while persistent speculation of a more aggressive rate path by the Fed in the coming months also contributes to the constructive view on the dollar.
Turning to US data, February Trade Balance, ISM Services PMI and Markit Services PMI for March will be released today.
Also, FOMC’s L. Brainard, Minneapolis Fed Governor N. Kashkari, and J. Williams (permanent voter, centrist) are due to speak later in the LA session.
What can we expect around the USD
The DXY index managed to regain strong traction to the upside after bottoming out at the 97.70 region in the second half of last week. Meanwhile, the very short-term price action in the dollar continues to be 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 0.09% on the day, trading at 98.89. A break above 99.36 (28 Mar high), would open the door to 99.41 (7 Mar high) and 100.00 (psychological level). On the other hand, the next support appears at 97.68 (March 30 low), followed by 97.23 (55-day SMA) and 96.69 (100-day SMA).
Source: Fx Street
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