- The DXY index extends the rally above the 100.00 level on Tuesday.
- US 10-year yields trail behind the 2.80% level.
- US CPI inflation stands out on today’s economic calendar.
The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, maintains the upward trend and looks to extend momentum above the key 100.00 level on Tuesday.
DXY index focuses attention on the IPC
The DXY index advances for the ninth day in a row so far on Tuesday, posting new highs above the psychological level of 100.00 and always supported by the upward move in US yields.
The relentless move higher in the DXY index is supported by an equally strong rally in US yields across the curve, where 10-year bond yields break the 2.80% barrier for the first time since December 2018.
In addition, the lack of any positive news from the geopolitical landscape also seems to reinforce the sentiment around the dollar, while peace talks between Russia and Ukraine remain stalled.
Regarding the US data, all attention will be on the publication of the inflation figures for the month of March measured by the CPI. In addition, the NFIB Business Optimism Index, the IBD/TIPP Economic Optimism Index and the Monthly Budget Statement will also be released today. There is also a scheduled speech from L. Brainard of the FOMC and Richmond Fed Governor T. Barkin.
What can we expect around the USD
The DXY finally managed to recover and move above the psychological hurdle of 100.00 so far this week. 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 up 0.24% on the day, trading at 100.21. 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, the next support appears at 97.68 (March 30 low), followed by 97.61 (55-day SMA) and 96.90 (100-day SMA).
Source: Fx Street
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