- DXY bears find initial support around 103.50.
- US yields are now reversing early gains and trading defensively.
- US wholesale inventories, short-term invoice auctions come next.
The US dollar index (DXY), which tracks the dollar against a basket of its main competitors, retraces part of the initial rally above 104.00 on Monday.
US dollar index looks at risk trends
The index manages well to hang on to weekly gains after facing a wave of sell orders in the wake of the new 19-year high around 104.20.
The dollar’s corrective pullback comes against the backdrop of an equally tepid move in US yields, which are leaving behind previous highs after the opening bell on Wall St.
In the US data space, wholesale inventories expanded 2.3% mom in March ahead of the 3-month and 6-month bill auctions.
What to look for around USD
The dollar regained its strong appeal and managed to post new highs beyond 104.00, as investor expectations of a tighter rate path from the Federal Reserve were reinforced by Wednesday’s FOMC event. The dollar’s constructive stance is also supported by the current narrative of high inflation and strong labor market health, as well as bouts of geopolitical tensions and higher US yields.
Technical levels
Now, the index is gaining 0.21% at 103.87 and the break of 104.18 (high May 9, 2022) would open the door to 105.00 (round level) and finally 105.63 (high Dec 11, 2002). On the other hand, next support emerges at 102.35 (low May 5) followed by 99.81 (weekly low Apr 21) and then 99.57 (weekly low Apr 14).
Source: Fx Street
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