US Dollar: Bulls catch their breath above 99

Having caught a  fresh buying wave in the early trading hours of the session, the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, leaped to its highest level since the bearish opening gap following the first round of French presidential election at 99.50 and started to consolidate is gains. The index eased to 99.30 in the last hour and is looking o start a new leg up. As of writing, the index was at 99.40, up 0.38% on the day. 

The markets continue to price the probability of a June rate hike as the CME Group FedWatch Tool is showing a chance of 87.7% on Tuesday, higher than 83.1% seen on Monday. Moreover, the 10-year U.S. T-bond yield rose above the 2.4% mark on Tuesday for the first time since early April, boosting the demand for the greenback. Although today's data revealed that the IBD/TIPP Economic Optimism Index eased to 51.3 in March from 51.7 in February, it didn't hurt the USD as the index held above the neutral 50 level, signaling optimism for the eighth straight month.

• US: Economic optimism slips below pre-Trump election level - IBD/TIPP Poll

Federal Reserve Bank of Dallas President Robert Kaplan's speech later in the day could impact the index's movements if he provides some fresh insights into the rate hike path. Nevertheless, the index is likely to extend its recovery unless the odds of a rate hike drop dramatically.

Technical outlook

With a sustained move above 99.50 (daily high), the index could aim for the important 100 psychological level ahead of 100.45 (Apr. 13 high). On the downside, supports align at 99 (psychological level), 98.50 (May 8 low) and 97.60 (Nov. 1 low).

Headlines from the U.S. session:

• Moody's: Trump administration tax proposals would widen deficit, but benefit companies
• US: March 2017 sales of merchant wholesalers were $465.5 billion