US Dollar Index looks strong and breaks above 101.00

• The index adds to Thursday’s advance around 101.00.
• US yields extend the upside on Thursday.
• Flash April PMIs will be the salient event later in the session.

The greenback, in terms of the US Dollar Index (DXY), extends the bounce in the second half of the week and flirts with the key 101.00 mark on Friday.

US Dollar Index up on Fed, yields, geopolitics

The index is up for the second session in a row and already tests the boundaries of the 101.00 hurdle at the end of the week in a context dominated by renewed weakness in the risk complex, higher US yields and increasing geopolitical tensions.

Indeed, yields in the short end of the curve climb to new cycle peaks and approach the 2.80% area for the first time since December 2018, while the 10y benchmark note yields trade close to the 3.00% mark, also in levels last seen in late 2018.

The dollar saw its buying interest reinvigorated following the speech by Chair Powell at the IMF event on Thursday, when he practically confirmed a 50 bps rate hike at the May gathering. This view has been also underpinned by other members of the FOMC in past sessions.

The geopolitical landscape shows no progress amidst the utter absence of a diplomatic attempt to negotiate a solution to the conflict.

In the US docket, the preliminary figures for the Manufacturing and Services PMIs will be the only publications of note later in the NA session.

What to look for around USD

The dollar faces renewed buying interest and challenges the 2022 highs past the 101.00 barrier. So far, the greenback’s price action continues to be dictated by the likeliness of a tighter rate path by the Fed as well as geopolitics. In addition, the case for a stronger dollar also remains well propped up by high US yields and the solid performance of the US economy.

Key events in the US this week: IMF World/Bank Spring Meetings, Flash Services/Manufacturing PMIs (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is advancing 0.39% at 101.02 and the breakout of 101.91 (high March 25 2020) would open the door to 102.00 (round level) and finally 102.99 (2020 high March 20). On the other hand, initial contention emerges at 99.57 (weekly low April 14) followed by 97.68 (weekly low March 30) and then 97.24 (100-day SMA).