US Dollar Index DXY is cautious, holding on to the 105.00 level

• The DXY index alternates gains with losses around 105.00.
• US yields resume gains as US markets return to normal.
• Factory orders for May stand out on today’s economic calendar.

The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, moves no clear direction around the 105.00 region at the start of the European session on Tuesday.

DXY Index Looks Weak Amid Risk Appetite

The DXY index is trading virtually unchanged from Monday’s close, just above the 105.00 levelas US markets slowly return to normal activity after Monday’s Independence Day holiday.

At the moment, the dollar seems decoupled from the resumption of the bullish bias in US yields.that seem underpinned by ongoing sentiment in favor of risk assets.

A further consolidation around the dollar cannot be expected in the coming days in a week dominated by the FOMC Minutes release on Wednesday and June NFP Non-Farm Payrolls release on Friday.

Later in the American session today, factory orders for May will be the only release on the calendar.

What can we expect around the USD

The continuation of the risk appetite sentiment reinforces the lack of traction in the DXY index, which remains sidelined around the 105.00 area for now.

Meanwhile, the dollar remains well supported by the Fed’s monetary policy divergence from most of its G10 counterparts (especially the ECB), combined with bouts of geopolitical turmoil, rising US yields .and a possible “hard landing” of the US economy, all factors that favor a stronger dollar in the coming months.

Relevant DXY US Dollar Index Levels

At time of writing, the DXY index is down 0.05% on the day, trading at 105.09. Next support is at 103.67 (27 Jun low), followed by 103.41 (16 Jun low) and 101.29 (30 May low). On the other hand, a break above 105.54 (30 Jun high) would expose 105.78 (15 Jun high) and 107.31 (Dec 2002 high).