The US dollar index cuts its gains and returns to 97.20

  • DXY is under pressure near 97.50 on Friday.
  • US Core PCE rose more than expected in December.
  • Final consumer sentiment deflates to 67.2 in January.

The greenback’s bullish momentum appears to have waned after hitting new cycle highs above 97.40, as measured by the US Dollar Index (DXY).

US dollar index capped near 97.50

The index is now showing some of the recent advance as well as the loss of the bullish bias in US yields, particularly on the front end and underbelly of the curve.

It looks like investors have decided to cash in on some gains in light of the dollar’s recent sharp rise, as market participants continue to recalibrate expectations around the Fed’s potential moves in the coming months.

In the US, inflation tracked by the Core PCE rose 4.9% year-over-year in December and 5.8% for the PCE headline. Other results showed personal income and personal spending rose 0.3% on-month and contracted 0.6% on-month in December, respectively. Finally, consumer sentiment fell slightly to 67.2 in January according to the final U-Mich index.

Relevant US Dollar Index Levels

Now the index is down 0.01% to 97.19 and a break above 97.44 (28th January 2022 high) would open the door to 97.80 (30th June 2020 high) and finally to 98.00 (round level). On the flip side, the next downside barrier emerges at 96.05 (55-day MMS) backed by 95.41 (Jan 20 low) and then 94.62 (Jan 14, 2022 low).

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