The US Dollar Index looks cautious in the 106.30 region

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  • The index loses its grip and falls to 106.30.
  • US yields are heading back up amid alternating risk trends.
  • Initial complaints, trade balance then to be noted in the NA file.

The greenback, in terms of US Dollar Index (DXY)trades cautiously around 106.30 amid improving US yields and alternating trends in risk appetite.

US Dollar Index Looks at Risk Data and Trends

The index is trading with gains for the third straight session amid widespread cautious tone from market participants, all against the backdrop of escalating tensions between the US and China and recent hawkish messages from Fed speakers ahead of key nonfarm payrolls due Friday.

The deceleration in the dollar’s rebound also goes hand in hand with the rebound in US yields across the curve, particularly in the short term and in response to recent hawkish comments from the FOMC’s Daly, Bullard and Mester, who have championed further tightening over the course of the year. of the next few months. .

Back to the US roll, the usual weekly claims are due next, along with the balance of trade figures.

What to look for around the USD

Although risk aversion has eased somewhat over the past few hours, the Dollar remains bullish on the risk complex and keeps the index supported in the mid-106.00s for now.

The very short-term outlook for the dollar has deteriorated somewhat in recent sessions, particularly following the latest US GDP figures and the prospect of further Fed tightening in the coming months, which could lead to the economy further into contraction. territory.

On the upside for the dollar, the Fed’s divergence from most of its G10 counterparts (particularly the ECB), combined with bouts of geopolitical turmoil and an occasional re-emergence of risk aversion, continues to appear.

Key events in the United States this week: Trade balance, initial claims (Thursday) – Non-agricultural payroll, unemployment rate, evolution of consumer credit (Friday).

Significant problems on the rear boiler: Hard/soft/soft? downfall of the American economy. Escalation of geopolitical effervescence in the face of Russia and China. Fed more aggressive rate path this year and 2023. US-China trade conflict. The future of Biden’s Build Back Better plan.

Relevant US Dollar Index Levels

Now, the index is down 0.07% to 106.29 and faces next support at 105.04 (monthly low from Aug 2) followed by 104.91 (55-day MMS) and finally 103.67 ( June 27 weekly low). On the upside, a break above 107.42 (July 27 post-FOMC weekly high) would expose 109.29 (July 15 2022 high) and then 109.77 (September 2002 monthly high).

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