- The DXY index extends the move higher and makes new highs around 99.75.
- US yields accelerate higher after Brainard’s comments on Tuesday.
- MBA mortgage applications, Harker’s speech and FOMC minutes stand out on today’s economic calendar.
The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, extends the bullish momentum to new highs around the 99.75 level on Wednesday.
DXY index stronger on Fed speculation, targets 100.00 level
The DXY index advances for the fifth day in a row on wednesday and moves at levels last seen nearly three years ago in the 99.70 region as market participants continue to digest the recent (and surprising) aggressive comments from L.Brainard on Wednesday, when he advocated a faster Fed balance sheet drawdown, as well as a tighter rate path.
Brainard’s comments lifted US yields to levels last seen in the first quarter of 2019 at the short end and middle of the curve, while the long end rose to new 33-month highs.
The additional strength in the dollar comes from the prevailing uncertainty in the geopolitical landscape and the lack of progress in the peace talks between Russia and Ukraine, as well as US and EU plans to impose additional sanctions against Moscow.
When it comes to US economic data, MBA mortgage applications, Harker’s speech and the FOMC minutes stand out on today’s economic calendar.
What can we expect around the USD
The DXY index remains firm and is slowly approaching the psychological barrier at the 100.00 level. 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 0.10% on the day, trading at 99.57. A break above 99.75 (April 6 high), would open the door to 100.00 (psychological level) and 100.55 (May 14, 2020 high). On the other hand, the next support appears at 97.68 (March 30 low), followed by 97.31 (55-day SMA) and 96.74 (100-day SMA).
Source: Fx Street
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