The US dollar outlook improves as bond yields rise. The greenback’s advances are being driven by rising US Treasury yields in the aftermath of stronger PCE data. Although ISM data will be an emphasis in the coming days, the DXY enters the new week with sturdy uptrend momentum.

The US dollar is supported by rising T- yields

The US dollar, as measured by the DXY index. It climbed for the fourth week in a row this week, reaching its best close since January (105.2). Aided by a spike in US bond yields. 

A hardline repricing of the Fed’s stiffening track in reaction to a string of hotter-than-expected economic figures. That has driven the latest move in the fixed-income space.

Strong labor statistics, combined with persistently high rising prices. Have raised hopes for the Fed’s terminal rate, which is now 5.39%. Suggesting 3 more 25 basis point increase in the summer.

Wall Street’s anticipated higher peak for the cost of borrowing has boosted Treasury yields across the curve. Particularly at the front end, propelling the two years note to new cycle peaks above 4.82 percent. A level not seen since 2007. This has acted as a helped dollar to gain for the US greenback.

IMPLIED YIELD GRAPH FOR 2023 FEDERAL FUND FUTURES

Source: TradingView

The PCE Release helped the dollar to Rise

The current situation is unlikely to change anytime soon. Indeed, the January PCE numbers released on Friday showed an unexpected acceleration in the Fed’s preferred inflation gauge.

Indeed, the January PCE numbers were released on Friday. Which showed an unforeseen velocity in the Fed’s favored inflation gauge.

Broadly speaking, the stars shine to be aligning for an extension of the bullish US dollar. Momentum has been seen since the beginning of the month. Especially if incoming data points to severe economic fortitude.

The Manufacturing and Services PMI coming week in Focus

The Institute for Supply Management will release its manufacturing and services PMI reports next week. Providing more insight into how business activity evolved in Feb.

The Institute for Supply Management will release its manufacturing and services PMI reports next week. Providing more insight into how business activity evolved in Feb.

However, any economic strength in macroeconomic statistical data will be favorable for the US dollar. While weak points will slow its advance and limit future rises.

Technical Perspective

In regard to technical interpretation, the DXY index cleared a key resistance near 104.70. Heading into the weekend, bolstering its positive near-term perspective.

In either case, with an upward movement on its side, the US dollar could be on track to recheck the 2023 peak in the coming sessions.

Market sentiment will be crucial around that high point. However, a topside burst could prepare the way for a jump toward 106.18.

A bearish exclusion, on the other hand, could lead to price action convergence and a probable move toward the 104.70 mark.

Weekly Simple Moving Averages