- The DXY index begins the week with a positive tone near 93.00.
- US 10-year yields decline to levels below 1.65%.
- The Dallas Fed index stands out on today’s US economic calendar.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, trades with decent gains and is approaching the key zone at the 93.00 level on Monday.
US Dollar Index DXY focuses on US performance and data.
The DXY index leaves behind the small drop on Friday and resumes its rise with the initial target near the 93.00 region, area last visited November 2020.
The current rally in the dollar occurs despite key US 10-year benchmark yields losing some bullish momentum and they trade at the lower limit of the daily range in the zone below 1.65%.
Meanwhile, the strength of the dollar remains supported by the expected outperformance of the US economy versus the other G-10 countries, at least in the first half of the year. This view is reinforced by the solid pace of the US vaccination campaign and additional fiscal spendingaccording to the recently approved new stimulus package worth $ 1.9 trillion.
Regarding US data, the Dallas Fed Manufacturing Index will be released today, followed by FOMC Governor C. Waller’s speech on “Federal Reserve Independence.”
What can we expect around the USD?
The bullish momentum of the US dollar looks firm and solid, with the DXY index trading near the 93.00 level. Supporting this idea, the recent breakout of the 200-day SMA seems to reinforce the now constructive view on the dollar, at least in the short term. In addition, the recently approved fiscal stimulus package adds to the current superior performance of the US economy, as well as the investors’ perception of higher inflation in the coming months, all transforming into additional strength for the dollar. However, the Fed’s mega-accommodative stance (until “further substantial progress” in inflation and employment is made) and hopes for a strong global economic recovery remain a ubiquitous source of support for the appetite for oil. risk, which could limit the dollar’s upward momentum.
Key events in the US this week: CB Consumer Confidence (Tuesday) – ADP Report, President Biden Speech (Wednesday) – Initial Jobless Claims, ISM Manufacturing PMI (Thursday) – NFP Non-Farm Payrolls (Friday).
Eminent Background Issues: 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 gaining 0.02% on the day, trading at 92.77. A breakout of 92.91 (March 25 high) would expose 93.00 (round level) and 94.30 (November 4 high). On the other hand, the next support is at 91.30 (March 18 low), followed by 91.11 (50-day SMA) and then 91.05 (February 17 high).
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