• DXY regains some composure near 102.50 on Wednesday.
• US yields resume the uptrend along the curve.
• Mortgage Applications, Wholesale Inventories next on tap.

The US Dollar Index (DXY), which tracks the greenback vs. a basket of its main competitors, regains the smile and prints small gains around 102.50 midweek.

US Dollar Index keeps the side-lined trade unchanged

The index navigates choppy waters so far this week amidst the gradual advance in US yields as well as alternating risk appetite trends.

Indeed, US yields trade in the area of multi-week highs so far, always underpinned by market chatter surrounding upcoming interest rate hikes by the Federal Reserve at the June and July meetings.

In the US data space, weekly Mortgage Applications measured by MBA are due seconded by Wholesale Inventories for the month of April and the EIA report on crude oil inventories.

What to look for around USD

The index picks up pace and reclaims the mid-102.00s area amidst the so far erratic weekly performance.

The dollar’s weakness seen in mid-May came in response to the rising perception that inflation might have peaked in April, which in turn supports the idea that the Fed may not need to be as aggressive as market participants expect when it comes to raising the Fed Funds rates.

In the meantime, the Fed’s divergence vs. most of its G10 peers coupled with bouts of geopolitical effervescence, higher US yields and a potential “hard landing” of the US economy are all factors still supportive of a stronger dollar in the next months.

Key events in the US this week: MBA Mortgage Applications, Wholesale Inventories (Wednesday) – Initial Claims (Thursday) – Inflation Rate, Flash Consumer Sentiment, Monthly Budget Statement (Friday).

Eminent issues on the back boiler: Powell’s “softish” landing… what does that mean? 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 gaining 0.19% at 102.52 and a break above 102.83 (monthly high June 7) would open the door to 105.00 (2022 high May 13) and finally 105.63 (high December 11 2002). On the other hand, the next contention emerges at 101.64 (monthly low June 3) seconded by 101.59 (55-day SMA) and then 101.29 (monthly low May 30).