- The DXY index extends Thursday’s advance just above the 98.00 level.
- US yields are mixed after February’s inflation figures.
- Today highlights the publication of the preliminary index of consumer sentiment from the University of Michigan.
The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, extends the move up to 98.70 region during the European session on Friday.
DXY index firm after release of US CPI.
The index advances for the second session in a row on Friday and shifts focus to the immediate target at the 99.00 level after rising yields and no progress on the geopolitical landscape.
In fact, the mixed results so far in US money markets show some lack of upward traction in yields in the middle and end of the curve, while the short end has broken above 1.70% for the first time since September 2019.
It is worth mentioning that US yields have extended the monthly rally this week particularly in response to bouts of optimism in risk appetite and after US consumer prices rose at the fastest pace in forty years in February (reaching +7.9%).
Back to geopolitics and the situation in Ukraine, another round of talks between officials from both countries again failed to produce substantial progress Thursday beyond the promises of a future meeting.
Regarding the US data, the only publication to highlight will be the preliminary index of Consumer Sentiment from the University of Michigan for the month of March.
What can we expect around the USD
The DXY index extends the rise and approaches the 99.00 level at the end of the week, as the dollar renewed its upward momentum after the resurgence of risk aversion led by geopolitics and the firm recovery in US yields. The safe haven bias is expected to continue to support the dollar in the current uncertain context surrounding the military conflict between Russia and Ukraine. A stronger dollar also supports the current scenario of high inflation, the start of normalization of monetary conditions by the Fed later this month and the solid performance of the US economy.
Relevant DXY US Dollar Index Levels
At time of writing, the DXY index is up 0.22% on the day, trading at 98.73. A break above 99.41 (7 Mar high), would open the door to 99.97 (25 May 2020 high) and 100.00 (psychological level). On the other hand, next support appears at 97.85 (March 9 low), followed by 97.73 (Feb 24 high) and 96.35 (55-day SMA).
Source: Fx Street
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