- DXY adds to recent losses and puts 96.00 to the test.
- The dollar’s decline comes despite rising US yields.
- MBA mortgage applications are then handy on file.
the US Dollar Index (DXY)which measures the greenback against a basket of its main competitors, is again trading defensively around 96.00 on Wednesday.
The US dollar index penalized by a strong appetite for risk
The index lost ground for the second consecutive session amid further improvement in sentiment surrounding the risk complex and despite uncertainty on the geopolitical front remaining elevated.
The corrective USD decline comes amid another rally in US yields across the curve, with the 2-year note sailing in the zone above 1.60%, the belly approaching the 2.0% mark and the long end hovering around 2.27%.
In the US data space, weekly mortgage applications tracked by MBA will be the only release ahead of API’s weekly US Crude Oil Supply report later in the NA session.
What to look for around the USD
The appetite for riskier assets continues to weigh on the dollar and keeps the index under pressure around the 96.00 area. In the meantime, bouts of risk aversion should support the dollar as well as the current rhetoric of high inflation and the likelihood of a more aggressive start to the Fed’s normalization of its monetary conditions. Looking further ahead, and although the constructive outlook for the greenback seems well in place for now, recent hawkish messages from the BoE and ECB may undermine the expected rise in the dollar over the next few months.
Key events in the United States this week: MBA Mortgage Applications (Wednesday) – Advanced Q4 GDP, Initial Applications, New Home Sales (Thursday) – PCE, Durable Goods Orders, Personal Income/Expenses, Pending Home Sales, End Consumer Sentiment ( Friday).
Significant problems on the rear boiler: Escalation of geopolitical effervescence in the face of Russia and China. The trajectory of Fed rates this year. Trade conflict between the United States and China under the Biden administration.
Relevant US Dollar Index Levels
Now, the index is down 0.16% to 95.91 and a break above 96.43 (weekly high from February 14) would open the door to 97.44 (high from January 28, 2022) and finally to 97.80 (high from June 30, 2020). On the flip side, the next downside barrier emerges at 95.67 (16th Feb weekly low) followed by 95.17 (10th Feb weekly low) then 95.13 (4th Feb weekly low) ).