US Dollar extengs gains towards 92 amid upsurge in US T-bond yields

After starting the day with a bullish gap, the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, continued to push higher on Monday and renewed its daily high at 91.87. As of writing, the index was at 91.84, up 0.6% on the day.

The robust gains witnessed in the US Treasury bond yields seem to be the primary driver of the greenback's upsurge today. The fact that North Korea decided not to test another ballistic missile over the weekend and Hurricane Irma was downgraded to a tropical storm from a category 5 Hurricane brought back the risk appetite to the markets, weakening the demand for safe-havens like T-bonds and lifting their yields. At the moment, the 10-year T-bond yield was up 3.04% at 2.124%.

• Has the US 10-year Treasury yield bottomed out?

Moreover, amid a lack of major macroeconomic data releases, the index was able to correct its oversold-ness, which was caused by last weeks heavy selloff that dragged the DXY to its lowest level since January of 2015 at 90.99. The next significant data for the buck will be the August PPI and CPI data, which are due on Wednesday and Thursday respectively.

In the meantime, the Federal Reserve Bank of New York released the results from the August 2017 Survey of Consumer Expectations, which showed that median inflation expectations were unchanged at the one-year horizon at 2.5%. 

• NY Fed: Year-ahead inflation expectations remain unchanged

Technical outlook

A daily close above 92 (psychological level) could allow the index to extend its recovery gains towards 92.70 (Sep. 5 high) and 93.30 (Aug. 31 high). On the downside, supports could be seen at 91.40 (Sep. 7 low), 91 (Sep.8 low) and 90 (psychological level).