- The DXY index remains under slight bearish pressure near 90.00.
- President Powell reiterated the Fed’s ultra-accommodative stance.
- Powell’s second testimony, several Fed speeches, and US housing data stand out on today’s economic calendar.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, moves slightly by negative territory and close to key support at the 90.00 level during the European session on Wednesday.
US Dollar DXY Index Looks Weak After Powell
The DXY index appears to stabilize at the lower bound of the recent range and is trading near the 90.00 psychological support level, area that coincides with the key support line of 2020-2021 and is considered the last defense before a possible visit to the annual lows around 89.20.
Sentiment around the dollar remains depressed amidst ubiquitous stimulus talks and the prospects for a strong recovery world.
Also, the Fed chairman, Jerome Powell, practically ruled out any modification of the current asset purchase program or of the monetary stance in the foreseeable future in his appearance before Congress to deliver the Semi-Annual Report on Monetary Policy on Tuesday.
During the American session today Wednesday, Powell will testify one more time, although this time before the House Financial Services Committee. Additionally, L. Brainard of the FOMC and Vice President R. Clarida have speeches scheduled.
In terms of data, MBA mortgage applications, new home sales and the EIA report on crude oil supply will be released throughout the session.
What can we expect around the USD?
The DXY index flirts with key support at 90.00, while the selling bias around the dollar has accelerated lately. Meanwhile, bullish attempts on the dollar should remain short-lived, amid the fragile overall outlook for the currency in the medium / long term. This is underpinned by the Fed’s (strengthened) accommodative stance, additional fiscal stimulus, and prospects for a strong recovery in the global economy, which are seen to underpin better confidence in risk appetite.
Key events this week in the US: President Powell’s second testimony on Capitol Hill (Wednesday), fourth quarter GDP review and initial jobless claims (Thursday) and PCE measured inflation figures and final reading of consumer sentiment (Friday).
Eminent Background Topics: 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? Future of the Republican Party after Trump’s acquittal.
Relevant levels of the US dollar DXY index
At the time of writing, the DXY index is down 0.15% on the day, trading at 90.03. The next support is at 89.20 (January 6 low), followed by 88.94 (March 2018 low) and 88.25 (February 16, 2018 low). On the other hand, a breakout of 91.05 (February 17 high), would open the door to 91.38 (100-day SMA) and finally 91.60 (February 5 high).
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