- The DXY index is looking to regain the smile after Wednesday’s slide.
- Yields on US 10-year bonds are down and are approaching 1.30%.
- Powell’s testimony and weekly jobless claims 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, struggles for clear direction around the region of 92.40 Thursday.
US dollar DXY index focuses attention on Powell and the data
The DXY index try to find some buying interest after Wednesday’s sharp decline from the area of monthly highs in the 92.80 / 85 region.
The renewed selling pressure in the USD occurred in response to President Powell’s comments before testifying before Congress on Wednesday. Powell reiterated once more the transitional stance of the current high inflation, while underlining that “substantial progress” remains distant, pushing back any speculation of an earlier reduction in the bond buying program.
A greater weakness of the dollar is now echoed by the downward movement in key 10-year bond yields from the United States, which are relentlessly approaching the 1.30% level so far this Thursday.
Regarding US data, the initial weekly jobless claims, the Philadelphia Fed and New York Fed manufacturing index and the manufacturing / industrial production index will be released today, all before the second testimony of the President Powell before Congress, this time before the Committee on Banking, Housing and Urban Affairs.
What can we expect around the USD?
The rally in the DXY index flirted with monthly highs near 92.80 on Wednesday after sentiment improved around the dollar, only to return some of those gains later as investors weighed down on Powell’s pessimistic message in his first testimony. However, the positive stance in the DXY index continues to be underpinned by the strong pace of the economic recovery, higher-than-expected inflation figures, and growing rumors of earlier-than-expected rate hikes. The latter leaves very much alive the debate between the Fed and the opinion of the markets.
Key events in the US this week: Initial Jobless Claims, Powell Semi-Annual Testimony, Philadelphia Fed Index, Industrial Production (Thursday) – Retail Sales, Preliminary Consumer Sentiment for July (Friday).
Eminent Background Topics: Biden’s bill to support infrastructure and families. 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 0.03% on the day, trading at 92.33. Next support is at 91.51 (June 23 low), followed by 91.37 (200-day SMA) and 89.53 (May 25 low). On the other hand, a breakout of 92.84 (July 7 high) would open the door to 93.00 (round level) and finally 93.43 (March 21 high).
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