DXY US Dollar Index Seeks Direction Around 90.40 Level

• The DXY index looks to extend Wednesday’s gains in the 90.40 region.
• The focus remains on Treasury yields and US policy on Thursday.
• Fed Chairman Jerome Powell’s speech and initial US jobless claims are prominent on today’s economic calendar.

He US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, struggles to find a clear direction around the 90.40 region Thursday.

The DXY US Dollar Index remains capped at 90.70

The DXY index achieves stand firm above the round level of 90.00 so far in the second half of the week.

In fact, the dollar remains unchanged upward bias and seeks to increase Wednesday’s earnings, backed by renewed speculation of a possible Fed tightening sometime before the end of the year.

Further, the recent rally in US yields, particularly in the 10-year benchmark, continues to benefit the dollar and supports the recovery in the DXY index, which so far is capped in the 90.70 / 75 region (reached Monday).

Regarding the economic calendar, the initial weekly unemployment claims will focus the attention of investors, before the participation of Powell, chairman of the Fed, in a live broadcast event. Additionally, Atlanta Fed Governor R. Bostic and Dallas Fed Governor R. Kaplan have speeches scheduled later in the day.

What can we expect around the USD?

The DXY index has regained buying interest after bottoming out in the 89.20 region in the first trading week of the new year and has managed to advance to near the 90.70 level earlier this week where relevant resistance has emerged. The recovery in US yields continues to support the dollar, as investors continue to perceive a possible pick-up in inflationary pressure / expectations in response to the more likely increase in fiscal stimulus under a Democratic White House. However, the outlook for the dollar remains fragile in the short / medium term for the time being amid massive fiscal and monetary stimulus in the US economy, the “lower for longer” stance from the Federal Reserve and the prospects for a strong recovery in the global economy.

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 90.32. Immediate support is at 89.20 (January 6 low), followed by 88.94 (March 2018 low) and 88.25 (February 2018 low). On the other hand, a break of 90.72 (maximum of January 11), would open the door to 91.01 (maximum of December 21, 2020) and finally to 91.23 (maximum of December 7, 2020).