The US Dollar Index is testing 4-week lows at 97.70 ahead of data

The greenback has been under pressure this week, trading at multi-week lows of 97.70 when measured by the US Dollar Index (DXY) on Thursday. For the third session in a row, the index loses ground and trades at the 97.70 level, despite a cautious posture in wider risk appetite trends and resumed demand for bonds. On the latter, US yields continue to lose momentum and grind lower from recent peaks, with the US 10y benchmark falling for the third straight day to approximately 2.30 percent (down from around 2.55 percent on Friday).

On the geopolitical front, increased scepticism prevails in reaction to apparent progress in the ongoing Russia-Ukraine peace negotiations in Turkey, which have so far failed to produce any serious follow-up. Initial Claims are due in the US data sector, followed by inflation as defined by the PCE, Personal Income/Spending, and the Chicago PMI.

In addition, J.Williams of the New York Fed (permanent voter, centrist) is scheduled to speak. The index stays on the defensive, retesting the first support zone at 97.70. Meanwhile, the greenback’s very near-term price action continues to be dictated by geopolitics, while the case for a stronger dollar in the medium/long term is well supported by the current elevated inflation narrative, a potential more aggressive tightening stance from the Fed, higher US yields, and the US economy’s solid performance