USD Index climbs to fresh tops north of 105.00 ahead of key data

• The index picks up pace past the 105.00 mark on Monday.
• US 2-year yields reach new multi-year peaks past 4.80%.
• Durable Goods Orders, housing data next of note in the docket.

The USD Index (DXY), which gauges the greenback vs. a bundle of its main competitors, advances marginally and maintains the multi-session rally well in place for the time being.

USD Index looks at key data

The index rises for the fifth consecutive session and looks to extend the recent breakout of the key barrier at 105.00 the figure at the beginning of the week, always underpinned by the firmer tone in US yields and persevering speculation of a potential tighter-for-longer stance by the Fed.

The above appears also propped up by recent solid results from US fundamentals, which in turn accentuate the resilience in the US economy.

So far, and according to FedWatch Tool by CME Group, the probability of a 25 bps rate hike at the March 22 meeting is at just over 70%, from nearly 82% a week ago.

In the US data space, all the attention will be on the release of Durable Goods Orders seconded by Pending Home Sales and the speech by FOMC P.Jefferson (permanent voter, centrist).

What to look for around USD

The dollar remains bid north of the 105.00 barrier amidst the generalized lack of traction in the risk complex at the beginning of the week.

The probable pivot/impasse in the Fed’s normalization process narrative is expected to remain in the centre of the debate along with the hawkish message from Fed speakers, all after US inflation figures for the month of January showed consumer prices are still elevated, the labour market remains tight and the economy maintains its resilience.

The loss of traction in wage inflation – as per the latest US jobs report - however, seems to lend some support to the view that the Fed’s tightening cycle have started to impact on the still robust US labour markets somewhat.

Key events in the US this week: Durable Goods Orders, Pending Home Sales (Monday) – Advanced Goods Trade Balance, FHFA House Price Index, CB Consumer Confidence (Tuesday) – MBA Mortgage Approvals, Final Manufacturing PMI, ISM Manufacturing, Construction Spending (Wednesday) – Initial Jobless Claims (Thursday) – Final Services PMI, ISM Non-Manufacturing (Friday).

Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Persistent narrative for a Fed’s tighter-for-longer stance. Terminal rates near 5.5%? Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is gaining 0.02% at 105.28 and faces the next hurdle at 105.35 (monthly high February 27) seconded by 105.63 (2023 high January 6) and then 106.48 (200-day SMA). On the other hand, the breach of 103.43 (55-day SMA) would open the door to 102.58 (weekly low February 14) and finally 100.82 (2023 low February 2).