US Dollar Index pares the first weekly loss in three near 113.00 on strong yields, hawkish Fedspeak

• US Dollar Index grinds higher during three-day uptrend.
• Multi-year high yields keep DXY bulls hopeful but sluggish markets, mixed data probe upside moves.
• Fedspeak gains attention as pre-Fed silence period begins from Saturday.

US Dollar Index (DXY) bulls approach 113.00 threshold, extending the mid-week rebound from the 21-day EMA, even as markets remain quiet during early Friday. Even so, the greenback’s gauge versus the six major currencies brace for the first weekly loss in three.

The DXY weakened the UK’s cautious optimism earlier in the week before the chaos surrounding Prime Minister (PM) Liz Truss’ resignation underpinned the greenback’s safe-haven demand. On the same line could be the growing fears of inflation and the central bank aggression that propelled the US Treasury bond yields to multi-year high.

It should be observed that the news surrounding China’s easing of quarantine rules and mixed US data probed the greenback buyers the previous day.

That said, US Initial Jobless Claims eased to 214K for the week ended on October 07 versus 230K expected and a revised down 226K prior. Further, Philadelphia Fed Manufacturing Survey Index dropped to -8.7 for October versus the -5 market consensus and -9.9 previous reading. Additionally, US Existing Home Sales rose past 4.7M expected to 4.71M but eased below 4.78M prior. Recently, Federal Reserve Governor Lisa Cook mentioned that ongoing rate increases will be required.

Against this backdrop, Wall Street closed in the red following an initially upbeat performance while the US 10-year Treasury yields rose to the highest since 2008. That said, S&P 500 Futures extend the previous day’s losses with 0.50% intraday downside while the CME’s FedWatch Tool suggests a near 98% chance of the Fed’s 75 bps rate hike.

Looking forward, a light calendar in the US could restrict the DXY moves but the last dose of the Fed speakers’ comments before the blackout period preceding November’s Federal Open Market Committee (FOMC) meeting will be important to watch for fresh impulse.

Technical analysis

Sustained bounce off the 21-day EMA support, at 112.25 by the press time, directs DXY buyers towards the monthly resistance line near 113.45.