Treasury yields form a strong base for a fresh rise

A sideways consolidation above a trendline support strengthens the bullish case

Dollar index and the US Treasury yields remained broadly stable last week. In the absence of any major data release from the US last week, both the dollar index and the yields were range bound. But this week, the US inflation data will be out.

The US Consumer Price Index (CPI) data will be out on Wednesday. The inflation number could move the market either way. If the data shows that the inflation is heating up again, then it would push the dollar index and the yields higher. So, the inflation numbers could set the direction for the dollar and Treasury yields going forward.

ROOM TO FALL

The dollar index (105.30) seems to be struggling to get a strong follow-through rise. The index rose to a high of 105.74 and then has come down from there. This keeps the chances alive of the index falling to 104.50104.30. The broad 104.50104 is a very strong support zone.

A break below 104 is less likely. As such, we can expect the dollar index to reverse higher again from the 104.50-104 support zone. That leg of rise will have the potential to take the dollar index up to 106-107 again.

Only a fall below 104, will bring the index under pressure to see 103-102 on the downside.