US Dollar Index DXY Struggles to Hold Gains Around 104.50

• The DXY index is trading with slight gains around 104.50.
• US yields are mixed on Monday.
• New York’s Empire State Index, TIC flows and short-dated bond auctions stand out on today’s economic calendar.

The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, moves within a narrow range around the region of 104.50 during the European session on Monday.

DXY Index looks at risk trends and the Fed

The DXY index continues the sideways movement during the European session on Monday around the 104.50 region, amid a mixed behavior of US yields along the curve and the alternation of risk appetite trends.

In the US money market, yields on the short end of the curve attempt a slight rebound compared to the soft start of the week seen in the central and long part of the curve.

There are no news in the macroeconomic scenario for the dollar so far, while geopolitical tensions continue to riseespecially after Sweden and Finland expressed their intentions to join NATO in the very short term.

Meanwhile, investors remain focused on the Fed’s plans to further tighten monetary conditions in the coming months and into 2023.

Later, at the beginning of the American session, the New York Empire State Index will be published, followed by data on TIC flows and 3- and 6-month bill auctions. In addition, New York Fed Governor J. Williams is also scheduled to speak.

What can we expect around the USD

So far this month, the DXY found some decent early resistance at the 105.00 zone. Supporting the dollar comes from investors’ expectations of a tighter rate path from the Federal Reserve and its correlation with yields, the current narrative of high inflation, and the strong health of the US labor market. In the negative aspects for the dollar appear the incipient speculations of a “hard landing” of the US economy as a consequence of the more aggressive normalization of the Fed.

Relevant DXY US Dollar Index Levels

At time of writing, the DXY index is up 0.10% on the day, trading at 104.58. A break above 105.00 (13th May high), would open the door to 105.63 (11th Dec 2002 high) and 106.00 (round level). Elsewhere, immediate support appears at 102.35 (low May 5), followed by 99.81 (low Apr 21) and 99.57 (low Apr 14).