US Dollar preserves daily gains above 94.30 as US T-bond yields erase losses

• Wall Street retraces early losses to turn positive on the day.
• 10-year T-bond yield recovers from daily lows in the NA session.
• DXY movements on the day are technical amid an empty economic calendar.

After starting the week with a bullish gap,  the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, edged higher to mid-94s before turning flat at 94.30. However, an improved market sentiment allowed the index to stage a modest recovery. At the time of writing, the DXY was at 94.40, up 0.1% on the day.

The 10-year US T-bond yield, which fell to 2.37% during the European session, erased its losses towards the 2.4% mark when American traders hit their desks, and was last seen at 2.39%, still down 0.3% on the day. Furthermore, the improved market sentiment in the second half of the day is also supporting the index's recent upside. Following a negative start to the day, major equity indexes in the U.S. reversed course as investors went bargain shopping. However, the DXY remains fragile in the short-term as the uncertainty regarding the tax plan is likely to impact the price action.

The next significant fundamental catalyst for the greenback will come on Wednesday when the US Bureau of Labor Statistics announces the October CPI and retail sales data. 

• US CPI to test 90% odds of Dec Fed hike - ING
• US: Data likely to show recovery in economy - BBH

Technical levels to consider

The initial support for the index could be seen at 93.95/94 (50-DMA/psychological level) ahead of 93.10 (Oct. 4 low) and 92.60 (Oct. 13 low). On the upside, resistances align at 95 (psychological level), 95.60 (Jul. 14 high) and 96.25 (Jul. 5 high).