• The index adds to Friday’s rebound and retargets 102.00.
• US yields keep the march north and bolster the dollar.
• The NY Empire State index surprised to the upside in April.

The USD Index (DXY), which tracks the greenback vs. a bundle of its main competitors, extends Friday’s bounce to the boundaries of 102.00 the figure at the beginning of the week.

USD Index supported by yields, rates hike bets

The index now trades on a firmer foot and pokes with the key barrier at the 102.00 region on the back of the continuation of the selling bias in the risk-associated universe, while further upside in US yields across the curve also collaborates with the daily uptick.

In the meantime, bets on a 25 bps rate hike by the Federal Reserve at the May 3 event remain on the rise and look propped up by hawkish Fedspeak, while the still elevated inflation also seems to maintain the prudent stance among investors.

In the US docket, the NY Empire State Manufacturing Index improved to 10.8 for the current month. Later in the session, the NAHB Housing Market Index and TIC Flows are both due.

What to look for around USD

The dollar’s corrective upside remains en route to challenge the key barrier at 102.00 on Monday.

In the meantime, the marked retracement in the buck since March has been underpinned by the pick-up in the perception that the Federal Reserve could make a pause in its current tightening cycle just after the May meeting.

In favour of a pivot in the Fed’s normalization process, however, still emerges the persevering disinflation, nascent weakness in some key fundamentals and somewhat persistent concerns surrounding the banking sector.

Key events in the US this week: NAHB Housing Market Index, TIC Flows (Monday) – Building Permits, Housing Starts (Tuesday) – MBA Mortgage Applications, Fed’s Beige Book (Wednesday) – Initial Claims, Philly Fed Index, CB Leading Index, Existing Home Sales (Thursday) - Flash Manufacturing/Services PMIs (Friday).

Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is advancing 0.31% at 101.89 and the next resistance level emerges at 103.05 (monthly high April 3) seconded by 103.53 (100-day SMA) and then 105.11 (weekly high March 15). On the flip side, the breach of 100.78 (2023 low April 14) would open the door to 100.00 (psychological level) and finally 99.81 (weekly low April 21 2022).