US dollar index DXY moves higher and targets 102.00

• The DXY index extends Tuesday’s gains and approaches 102.00.
• US yields resume the upward trend along the curve.
• The US ISM Manufacturing PMI and the Federal Reserve Beige Book stand out on today’s economic calendar.

The US dollar index DXYwhich measures dollar strength against a basket of major currencies, extends the rebound from multi-week lows on Monday and looks to rally above the 102.00 level during the European session on Wednesday.

DXY Index focuses attention on risk trends and data

The DXY index advances for the second consecutive session and flirts with the 102.00 region in a context in which risk appetite remains on the defensive and US yields regain their composure.

In fact, the selling pressure is gaining strength in the US bond markets and motivates yields are back on the upward path along the curve. That said, the short end is hovering around 2.60%, the belly is nearing 2.90%, and the long end is again targeting 3.10%.

Busy day in the American economic calendar. Weekly mortgage applications are released first, followed by the final manufacturing PMI, ISM manufacturing PMI, construction spending and the Fed’s Beige Book.

Also, J. Williams of the New York Fed and J. Bullard of the St. Louis Fed will speak later in the American session.

What can we expect around the USD

The dollar rebounds from recent multi-week lows as risk appetite appears to be taking a breather.

The renewed weakness of the dollar responds to the growing perception that inflation could have peaked in April, which in turn supports the idea that the Fed may not have to be as aggressive as market participants expect when it comes to raise federal funds rates.

Meanwhile, the Fed’s divergence from most G10 central banks, coupled with geopolitical turmoil, rising US yields and a possible “hard landing” of the US economy, are factors that remain favoring the strength of the dollar in the coming months.

Relevant DXY US Dollar Index Levels

At time of writing, the DXY index is up 0.20% on the day, trading at 101.98. Breaking above 105.00 (May 13 high) would open the door to 105.63 (Dec 11 2002 high) and 106.00 (round level). On the other hand, the next support is at 101.29 (low May 30), followed by 101.22 (55-day SMA) and 99.81 (low Apr 21).