The index fades the recent weakness and clinches new 2022 peaks.
US yields show some signs of recovery across the curve.
Weekly Claims, Producer Prices next on tap in the US docket.
The greenback, in terms of the US Dollar Index (DXY), leaves behind two consecutive daily drops and advances to new cycle tops past 108.60 on Thursday.
US Dollar Index looks stronger post-CPI
The index resumes the upside following a brief correction and trades in fresh peaks beyond 108.60, an area las visited in October 2002.
The move higher in the dollar appears to be supported by renewed speculation of a full-point interest rate hike at the next Fed gathering on July 27. This view was particularly exacerbated after the US inflation rose more than estimated in June, running at new 40-year highs beyond 9% YoY.
Further tailwinds for the greenback come, as usual, from the unabated weakness in the risk complex, which in turn appears reinvigorated by the likelihood of a recession in the euro area amidst the persevering energy crunch.
In the US docket, June Producer Prices are due along with the usual weekly Claims. In addition, the Fed’s black-out period kicks in today.
What to look for around USD
The index pushed higher and clinched new cycle highs past 108.60 on Thursday. It is worth noting, however, that the recent sharp move in the dollar comes largely in response to the accelerated decline in the euro and persistent uncertainty around a potential recession in the old continent.
Further support for the dollar is expected to come from the Fed’s divergence vs. most of its G10 peers (especially the ECB) in combination with bouts of geopolitical effervescence and the re-emergence of the risk aversion among investors. On the flip side, market chatter of a potential US recession could temporarily undermine the uptrend trajectory of the dollar somewhat.
Key events in the US this week: Producer Prices, Initial Claims (Thursday) – Retail Sales, Industrial Production, Flash Consumer Sentiment, Business Inventories (Friday).
Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Escalating geopolitical effervescence vs. Russia and China. Fed’s more aggressive rate path this year and 2023. US-China trade conflict. Future of Biden’s Build Back Better plan.
US Dollar Index relevant levels
Now, the index is up 0.45% at 108.50 and a break above 108.63 (2022 high July 14) would expose 108.74 (monthly high October 2002) and then 109.00 (round level). On the flip side, the next support aligns at 103.67 (weekly low June 27) seconded by 103.41 (weekly low June 16) and finally 101.29 (monthly low May 30).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
