US Dollar Index remains offered around 96.00

• DXY adds to recent losses and puts 96.00 to the test.
• The downtick in the dollar comes despite higher US yields.
• MBA Mortgage Applications next on tap in the docket.

The US Dollar Index (DXY), which gauges the greenback vs. a basket of its main competitors, trades once again on the defensive around the 96.00 neighbourhood on Wednesday.

US Dollar Index hurt by firm risk appetite

The index sheds ground for the second session in a row against the backdrop of further improvement in the sentiment surrounding the risk complex and despite uncertainty in the geopolitical front remains high.

The corrective downside in the buck comes amidst further recovery in US yields across the curve, with the 2y note navigating the area above 1.60%, the belly approaching the 2.0% yardstick and the long end gyrating around 2.27%.

In the US data space, weekly Mortgage Applications tracked by MBA will be the sole release ahead of the weekly report on US crude oil supplies by the API later in the NA session.

What to look for around USD

The appetite for riskier assets continues to weigh on the dollar and keeps the index under pressure around the 96.00 zone. In the meantime, bouts of risk aversion are expected to support the buck as well as the current elevated inflation narrative and the probability of a more aggressive start of the Fed’s normalization of its monetary conditions. Looking at the longer run, and while the constructive outlook for the greenback appears well in place for the time being, recent hawkish messages from the BoE and the ECB carry the potential to undermine the expected move higher in the dollar in the next months.

Key events in the US this week: MBA Mortgage Applications (Wednesday) – Advanced Q4 GDP, Initial Claims, New Home Sales (Thursday) – PCE, Durable Goods Orders, Personal Income/Spending, Pending Home Sales, Final Consumer Sentiment (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict under the Biden administration.

US Dollar Index relevant levels

Now, the index is losing 0.16% at 95.91 and a break above 96.43 (weekly high Feb.14) would open the door to 97.44 (2022 high Jan.28) and finally 97.80 (high Jun.30 2020). On the flip side, the next down barrier emerges at 95.67 (weekly low Feb.16) seconded by 95.17 (weekly low Feb.10) and then 95.13 (weekly low Feb.4).