Dollar Index struggles amid range bound treasury yields

• Greenback holds below 94.00 levels.
• 10-year treasury yield remains range-bound ahead of the Fed.

The sharp recovery in the dollar index (DXY) from the Nov. 27 low of 92.50 appears to have run out of steam near 94.00 levels, courtesy of the range bound action in the treasury yields.

The 10-year yield has been restricted largely to a narrow range of 2.3 percent to 2.45 percent since late October. An upside break of the trading range may revive the interest in the greenback and could lift the DXY well above 94.00 levels.

Focus on the Fed

Markets seem to have priced-in a 25 basis point rate hike, hence there is a risk of a drop in the USD following the rate hike. The bid tone around the greenback could strengthen if the Fed retains its hawkish interest rate forward guidance.

DXY Technical Levels

The index was last seen trading around 93.90 levels. A close above 94.00 (psychological hurdle) would open doors for 94.41 (Nov. 2 low) and 94.90 (Oct. 30 high). On the other hand, a breakdown of support of 93.81 (50-day MA + 5-day MA) would shift risk in favor of a drop to 93.49 (10-day MA) and 93.33 (100-day MA).