DXY tests multi-day lows in the 98.00 neighborhood
The continuation of the upbeat momentum in the risk complex forces the US Dollar Index (DXY) to shed further ground and revisit the 98.00 region on Wednesday. The index adds to Tuesday’s pullback and puts the 98.00 support to the test on Wednesday amidst the persistent improvement in the risk-associated assets, in turn, underpinned by recent positive news from the geopolitical scenario. The corrective move in the dollar comes pari passu with a decent move lower in US yields after hitting fresh cycle peaks earlier in the week. We have an interesting day in the US docket, where weekly Mortgage Applications are due in the first turn seconded by the ADP report and the final Q4 GDP figures.
Positive developments from the geopolitical landscape put the buck under strong downside pressure and forced the index to drop further into the negative territory. In the meantime, very near-term price action in the greenback continues to be dictated by geopolitics, while the case for a stronger dollar in the medium/long term remains well propped up by the current elevated inflation narrative, a potentially more aggressive tightening stance from the Fed, higher US yields and the solid performance of the US economy. Now, the index is down 0.39% 98 02 and a break above 99.41 (2022 high March 7) would open the door to 100.00 (psychological level) and finally 100.55 (monthly high May 14, 2020). On the flip side, the next down barrier emerges at 97.72 (weekly low March 17) seconded by 97.71 (weekly low March 10), and then the 55-day SMA at 96.98.