- The index DXY extends the lateral movement around 90.50.
- Investors’ focus remains on inflation, yields and conversations about reducing bond purchases.
- The FOMC is largely expected to keep the pessimistic message on Wednesday.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, extends the consolidation movement around the 90.50 zone during the European session on Wednesday.
US dollar DXY index focuses on the Fed
Price action around the DXY index remains choppy so far this week, always hovering around the 90.50 region. amid steady returns and increasing caution ahead of FOMC key event later on Wednesday.
On the latter, though any movement in rates is ruled out, investors will closely monitor any clues about the timing of a bond purchase program modificationas well as the updated dot plot. Furthermore, the Committee is seen as sticking to the “transitory” story when it comes to higher inflation, although it is expected to offer an optimistic assessment of the outlook for the economy.
What can we expect around the USD?
DXY Index Maintains Sideways Movement Unchanged Around 90.50 So Far This Week seems step in the cautious tone ahead of the FOMC event. Higher inflation figures in May failed to ignite a serious bullish bid on the dollar, while also forcing yields back to multi-month lows well below 1.50%. The outlook for the currency remains on the downside and this view remains supported by the Fed’s persistent mega-accommodative stance (until “further substantial progress” in inflation and employment is made) for the foreseeable future. and growing optimism about a strong global economic recovery.
Key events in the US this week: Housing Starts, Building Permits, FOMC Event (Wednesday) – Initial Jobless Claims, Philadelphia Fed Index (Thursday).
Eminent Background Topics: Biden’s bill to boost infrastructure worth nearly $ 6 trillion. Trade conflict between the United States and China under the Biden administration. Reduction of speculation in the face of economic recovery. Real US interest rates versus Europe. Could US fiscal stimulus cause overheating?
Relevant levels of the US Dollar DXY Index
At the time of writing, the DXY index is down 0.07% on the day, trading at 90.44. The next support is at 89.53 (May 25 low), followed by 89.20 (Jan 6 low) and 88.94 (March 2018 low). On the other hand, a breakout of 90.62 (June 4 high) would open the door to 90.90 (May 13 high) and finally 91.05 (100-day SMA).
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