- DXY index leaves Friday’s pullback behind and climbs back above 103.00
- US yields extend the recent rally and move higher.
- The ISM Manufacturing PMI will be the highlight during the American session.
The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, regains traction on the upside and moves above the 103.00 level during the European session on Monday.
DXY index focuses on yields, the Fed and data
The DXY index quickly reverses friday’s slump and resumes the strong rally above the 103.00 level on Monday.
The dollar experienced a particularly exacerbated rise in April in response to the Fed’s aggressive messageas well as Chairman Powell, who opened the door to a more aggressive normalization of monetary conditions.
About the latter, a 50 basis point interest rate hike is expected at the FOMC meeting later in the week, while market participants continue to price in the possibility of six or seven additional hikes in the coming months.
The dollar’s bullish bias remains supported by rising US yieldswhere benchmark 10-year yields are approaching the key 3.00% level and the short end of the curve flirts with an area last visited more than three years ago near 2.80%.
Later in the American session, the ISM Manufacturing PMI for April will focus investors’ attention, along with the S&P Global Manufacturing PMI. In addition, there will be an auction of 3 and 6 month notes.
What can we expect around the USD
The DXY index is smiling again after Friday’s pullback and points to a possible test of recent cycle highs just below 104.00 (28 Apr). The Fed’s more aggressive rate path continues to be the main driver behind the US dollar’s strong bullish stance, which also seems bolstered by ongoing fears of elevated inflation and strong labor market health. Also contributing to the rise in the dollar are the latest geopolitical tensions, as well as the upward movement in US yields.
Relevant DXY US Dollar Index Levels
At time of writing, the DXY index is up 0.03% on the day, trading at 103.24. A break above 103.92 (28 Apr 2022 high), would open the door to 104.00 (round level) and 105.63 (11 Dec 2002 high). On the other hand, next support appears at 99.81 (21 Apr low), followed by 99.57 (14 Apr low) and 97.68 (30 Mar low).
Source: Fx Street
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