- The DXY index faces some selling sentiment and retests the 103.00 zone.
- US yields move in consolidation near recent highs.
- US PCE inflation will focus investors’ attention later in the American session.
The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, faces a corrective decline and approaches the region of 103.00 at the start of the European session on Friday.
DXY index focuses on the PCE
The DXY index moves defensively after six consecutive daily advances and returns to the 103.00 area after making fresh cycle highs a few pips below the 104.00 hurdle on Thursday.
In the US cash markets, yields trade with no clear direction so faralthough they manage to hold onto the upper end of the recent range on Friday.
Meanwhile, the dollar remains supported by speculations of a tighter normalization of Fed monetary conditionswhich are expected to start with a 50 basis point rate hike after their May 4 meeting.
The beginning of the American session, the inflation figures measured by the PCE (the Fed’s preferred gauge) will be the most prominent event, followed by personal income/spending data and final consumer sentiment for the month of April.
What can we expect around the USD
The DXY index faces some correction after reaching a 19-year high on Thursday near the 104.00 barrier. 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.
Relevant DXY US Dollar Index Levels
At time of writing, the DXY index is down 0.68% on the day, trading at 102.98. 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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