- The DXY index extends the previous day’s advance around the 101.00 level.
- US yields extend Thursday’s rally.
- The release of the preliminary PMIs for April stands out on the US economic calendar.
The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, extends the bounce to the upside during the European session on Friday and flirts with the key level of 101.00.
DXY index rises on Fed, yields and geopolitics
The DXY index rises for the second consecutive day and already tests the 101.00 barrier on Friday in a context dominated by renewed weakness in risk appetite, rising US yields and rising geopolitical tensions.
Short-term yields rise to new cycle highs and are approaching the 2.80% area for the first time since December 2018, while the 10-year benchmark is trading near the 3.00% level, too at levels last seen in 2018.
The dollar saw buying interest resume after Fed Chairman Jerome Powell’s speech at the IMF event on Thursday, when practically confirmed a 50 basis point rate hike at the May meeting. This view has also been supported by other FOMC members in recent days.
The geopolitical landscape shows no progress amid a complete absence of diplomatic attempts to negotiate a solution to the conflict.
On the US economic calendar, preliminary PMI manufacturing and services figures will be the only releases at the start of the American session.
What can we expect around the USD
DXY Index faces renewed buying interest and challenges 2022 highs above the 101.00 barrier. So far, dollar price action remains dictated by the prospect of a tighter Fed rate tightening and geopolitics. Furthermore, the case for a stronger dollar also remains well supported by high US yields and the strong performance of the US economy.
Relevant DXY US Dollar Index Levels
At time of writing, the DXY index is up 0.39% on the day, trading at 101.02. A break above 101.91 (25 Mar 2020 high), would open the door to 102.00 (round level) and 102.99 (20 Mar 2020 high). On the other hand, the next support appears at 99.57 (low Apr 14), followed by 97.68 (low Mar 30) and 97.24 (100-day SMA).
Source: Fx Street
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