• DXY is testing multi-day lows in the vicinity of 98.00.
  • US yields extend the downtrend on Wednesday.
  • ADP, fourth quarter GDP is the next item to note on the US calendar.

The continuation of the positive dynamics of the risk complex obliges US Dollar Index (DXY) to gain ground and revisit the 98.00 region on Wednesday.

US dollar index turns to data, Ukraine

The index adds to Tuesday’s pullback and tests the 98.00 support on Wednesday amid continued improvement in risk assets, in turn underpinned by recent positive news from the geopolitical scenario.

The dollar’s corrective move comes pari passu with a decent drop in US yields after hitting new cycle highs earlier in the week.

It will be an interesting day in the US ledger, where weekly mortgage applications are due in the first round, supported by the ADP report and final fourth quarter GDP numbers.

What to look for around the USD

Positive developments in the geopolitical landscape put strong downward pressure on the dollar and forced the index to fall further into negative territory. In the meantime, the greenback’s very near-term price action continues to be dictated by geopolitics, while the case for a stronger dollar in the medium/long term remains well supported by current discourse. on high inflation, a potentially more aggressive tightening stance by the Fed, rising US yields and the strong performance of the US economy.

Key events in the United States this week: Mortgage Applications, ADP Employment Change, Final Q4 GDP (Wednesday) – PCE Price Index, Initial Unemployment Claims, Personal Income, Personal Spending (Thursday) – Nonfarm Payrolls, Rate unemployment rate, final manufacturing PMI, ISM manufacturing PMI (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. US-China trade dispute. The future of Biden’s Build Back Better plan.

Relevant US Dollar Index Levels

Now the index is down 0.39% 98 02 and a break above 99.41 (7 Mar 2022 high) would open the door to 100.00 (psychological level) and finally 100.55 (monthly high from May 14, 2020). On the flip side, the next downside barrier emerges at 97.72 (weekly low from March 17) backed by 97.71 (weekly low from March 10) and then the 55-day SMA at 96.98.