USD Index reaches new highs past the 106.00 hurdle

• The index extends the march north past the 106.00 mark.
• Higher US yields continue to underpin the rally in the dollar.
• US housing data, Consumer Confidence, Fed’s Bowman next on tap.

The greenback, in terms of the USD Index (DXY), adds to the ongoing rally and surpasses the 106.00 hurdle to print new 2023 peaks on turnaround Tuesday.

USD Index looks at yields, data

The index advances for the third session in a row on Tuesday and reclaims the area above the 106.00 barrier on the back of the intense buying interest around the greenback, higher US yields across the curve and further weakness in the risk complex.

The perception that the Federal Reserve might remain in the restrictive territory for longer than anticipated continue to underpin the rally in the greenback, while the equally strong upside bias in US yields across different time frames also contributes to the upbeat mood around the index.

Later in the US data space, Consumer Confidence tracked by the Conference Board should be in the limelight seconded by FHFA’s House Price Index, New Home Sales and the speech by FOMC Governor M. Bowman (permanent voter, hawk).

What to look for around USD

The index remains well supported by both investors’ sentiment and higher yields, pushing the dollar to new yearly peaks north of the 106.00 hurdle on Tuesday.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which at the same time appears underpinned by the renewed tighter-for-longer stance narrative from the Federal Reserve.

Key events in the US this week: House Price Index, New Home Sales, CB Consumer Confidence (Tuesday) – MBA Mortgage Applications, Durable Goods Orders (Wednesday) – Initial Jobless Claims, Pending Home Sales, Final Q2 GDP Growth Rate, Fed Powell (Thursday) – PCE, Core PCE, Personal Income, Personal Spending, Advanced Goods Trade Balance, Final Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Persevering debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China.

USD Index relevant levels

Now, the index is up 0.22% at 106.18 and a breakout of 107.19 (weekly high November 30, 2022) would open the door to 107.99 (weekly high November 21 2022) and finally 113.14 (monthly high November 3, 2022). On the other hand, initial support emerges at 104.42 (weekly low September 11) ahead of 103.06 (200-day SMA) and then 102.93 (weekly low August 30).