- The DXY index found stiff resistance at the 90.70 / 75 region on Monday.
- Higher US yields continue to drive the DXY index rally.
- The NFIB index, the IBD / TIPP index, and various Fed speeches stand out on today’s economic calendar.
He US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, seems to have encountered significant resistance in the 90.70 region at the beginning of the week.
DXY US Dollar Index focuses attention on US yields and policy
The DXY index has difficulty extending recovery above the 90.70 / 75 region on Tuesday and loses some ground for the first time after four consecutive daily gains.
As usual in recent days, the rally in US bond yields remains the key factor behind the recent movement of the DXY index. It’s worth remembering that US 10-year benchmark yields are at levels last seen in March 2020 around 1.15%.
On the political front, investors and market participants seem to ignore the possible impeachment of President Trump, focusing instead on the likely increase in fiscal stimulus under the Biden administration. and the impact on inflation expectations.
Regarding US data, the NFIB index will be released at the start of the American session, followed by the IBD / TIPP index, JOLTs job openings and the API report on supplies of Crude oil in the US In addition, Atlanta Fed Governor R. Bostic is scheduled to speak, followed by FOMC’s L. Brainard, Dallas Fed Governor R. Kaplan, the Governor of the Cleveland Fed, L. Mester, and Kansas City Fed Governor, E. George.
What can we expect around the USD?
The DXY index has recovered buying interest after bottoming out in the 89.20 region in the first week of trading of the new year and has managed to advance to near the 90.70 level so far this week. 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 0.11% on the day, trading at 90.36. 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).