US Dollar Index approaches 99.10 hurdle amid risk-off mood, yields, NFP in focus

• US Dollar Index stays on the front foot for fourth consecutive day.
• US 10-year Treasury yields retreat from three-year high, S&P 500 Futures print mild losses amid anxiety over Russia-Ukraine peace talks.
• Fed policymakers suggest tighter policy ahead, US data eased on Friday.
• Risk catalysts keep driver’s seat amid light calendar ahead of US jobs report, Fedspeak will be important too.

US Dollar Index (DXY) takes the bids to refresh intraday high near 98.87 during Monday’s Asian session. The greenback gauge seems to benefit from the market’s risk-aversion, as well as the hawkish Fed comments, by eyeing the key resistance line of late.

The chatters surrounding the regime change in Russia, coupled with the indecision over the peace talks between Kyiv and Moscow, recently weighed on the market’s sentiment. US President Joe Biden and German Chancellor Olaf Scholz assured no plans to push for policy change in Russia after comments from Biden challenged sentiment as he said, “For God's sake, this man cannot remain in power."

Elsewhere, Ukrainian President Volodymyr Zelenskyy also pushed for the progress of the Ukraine-Russia peace talks by saying, “We're ready to discuss neutrality and non-nuclear status if security guarantees are provided.” However, his comments like, “Ukraine to insist on sovereignty and territorial integrity with talks with Russia,” challenges the market’s mood.

Also posing risk to the market sentiment, while also favoring the US dollar’s safe-haven demand, is the latest lockdown in Shanghai amid rising covid infections.

Furthermore, Fed policymakers’ marked aggression towards faster policy tightening and the talks over the balance sheet normalization also propel the yields, as well as the DXY bulls.

It’s worth noting that the recently downbeat data relating to consumer sentiment and the housing market from the US challenge the greenback buyers.

Even so, the latest Commodity Futures Trading Commission (CFTC) data suggests the speculators increase net long us dollar bets to $13.27 billion in the latest week.

Amid these plays, the US 10-year Treasury yields retreat from the highest since 2019 to 2.4569%, down 3.34 basis points (bps), whereas the S&P 500 Futures drop 0.23% at the latest.

Looking forward, risk catalysts are likely to keep the DXY bulls busy ahead of the monthly prints of the US Nonfarm Payrolls (NFP), expected 488K versus 678K prior.

Technical analysis

Sustained trading beyond the 21-DMA, around 98.40 at the latest, directs DXY towards a three-week-old resistance line near 99.10, a break of which won’t hesitate to challenge the monthly high near 94.40.