US dollar index DXY loses traction to the upside and falls below 96.20

• The DXY index gives back some of the gains and falls back below 96.20 on Tuesday.
• The confrontation between Russia and Ukraine continues to be the focus of attention.
• The PPI Producer Price Index, Empire State Manufacturing Index and TIC Flows stand out in today’s economic calendar.

The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, appears to be taking a pause and drops back below the 96.20 area during the European session on Tuesday.

DXY Index focuses on geopolitics

The DXY index gives back some ground and retraces part of Monday’s rally to multi-day highs in the region of 96.40/45. Indeed, rising geopolitical tensions stemming from the conflict between Russia and Ukraine, coupled with support from the Fed’s speeches, provided an additional boost to the dollar’s rebound earlier in the week.

Meanwhile, the high yields also followed the hawkish tone of St. Louis Fed Governor J. Bullard, who reiterated his preference for a 100 basis point hike in interest rates for July. In this case, and according to CME Group’s FedWatch tool, the probability of a 50 basis point interest rate hike at the March 16 meeting is close to 60%compared to almost 30% just a week ago.

When it comes to US data, the PPI Producer Price Index, Empire State Manufacturing Index and TIC Flows stand out in today’s economic calendar.

Relevant DXY US Dollar Index Levels

At time of writing, the DXY index is down 0.24% on the day, trading at 96.05. A break above 96.43 (14 Feb high), would open the door to 97.44 (28 Jan high) and 97.80 (30 Jun 2020 high). On the other hand, the next support appears at 95.17 (low Feb 10), followed by 95.13 (low Feb 4) and 94.62 (low Jan 14).