DXY inter-markets: some rangebound ahead of a leg higher?

The US Dollar Index – which gauges the buck vs. a basket of its main G10 competitors – has advanced almost 1.5% since Monday’s YTD lows near 98.30 to yesterday’s 3-week tops in the 99.75/80 band, just to ease some ground afterwards to the mid-99.00s ahead of key releases in the US calendar.

The buck’s weekly rebound has been accompanied by a strong recovery in US yields, with the 10-year reference briefly testing monthly peaks above 2.42% and returning to the sub-2.38% zone during the European morning on Friday.

Supportive Fedspeak as of late have lent extra oxygen to speculations of a rate hike by the Federal Reserve at the June meeting. Measured by CME Group’s FedWatch tool, the probability of higher rates next month is at just above 83% based on Fed Funds futures prices.

In addition, April’s Non-farm Payrolls and lower-than-expected unemployment rate have added to the upbeat sentiment around USD, somewhat preparing markets for the case of a positive surprise from today’s CPI and Retail Sales readings.

In the meantime, the recent breakout of the critical 12-month support/resistance line and the 200-day sma (both in the low-99.00s) has added to the resurgence of the constructive prospect on the greenback, which remains underpinned by data, Fedspeak and bets on further tightening by the Fed in the near term. The psychological 100.00 handle, in the meantime, emerges as the interim hurdle, prior to April’s peak near 101.30. In the middle, several Fibo retracements of the April-May drop should offer minor resistance.