• The index trades in an inconclusive fashion near 104.50.
• US yields extend the drop to multi-session lows on Monday.
• Factory Orders, 3-month/6-month bill auctions come next.

The lack of a clear direction prevails around the greenback and motivates the USD Index (DXY) to navigate a narrow range in the mid-104.00s on Monday.

USD Index cautious ahead of data, lower yields

The index now adds to Friday’s decline and retests the 104.30 region on the back of further retracement in US yields across the curve and a mild bias towards the risk-associated universe at the beginning of the week.

In fact, the dollar kicks in the new trading week in an offered mood. This stance remains underpinned by fresh speculation that the Fed might not raise rates as high as previously estimated, which remains in stark contrast to the ongoing “aggressive” narrative from most Fed’s rate setters.

Furthermore, and according to the FedWatch Tool measured by CME Group, the probability of a 25 bps rate hike at the March 22 meeting hovers around 75%.

Later in the US docket, Factory Orders for the month of January will take centre stage followed by 3-month/6-month Bill Auctions.