- DXY remains depressed near new lows around 90.30.
- The core US CPI was flat on a monthly basis in January.
- Powell will speak later about the US job market.
The US Dollar Index (DXY), which measures the dollar against a basket of its G10 peers, maintains the sell bias unchanged in operations close to the weekly lows of 90.30.
The US dollar now looks at Powell
The index falls for yet another session on Wednesday and flirts at the same time with the 2020-2021 line. A breakout of this area in a sustainable way could put the dollar under further downward pressure.
Aside from the better mood in the risk complex, the dollar is losing ground along with falling US 10-year benchmark yields, which suddenly fell below 1.15% on the back of inflation data.
In fact, US inflation figures tracked by headline CPI indicated that consumer prices rose 0.3% monthly in the first month of the year, while prices without food and energy remained flat.
Later in the session, the EIA will release its weekly report on US crude oil reserves ahead of Powell’s speech from the Fed.
What to look for around USD
The corrective rise in the dollar lost steam at 91.60 on Friday, causing a sharp decline thereafter. Occasional bouts of strength in U.S. yields remain the almost exclusive driver of bullish attempts in the dollar, which helped with prospects for strong growth and the auspicious (and rapid) launch of vaccines against its peers. G10. The continuation of the downtrend of the dollar seems the most likely scenario in the context of the fragile prospects for the currency in the medium / long term, and always amid the current massive monetary / fiscal stimulus in the US economy, the “lowest longer ”from the Fed and prospects for a strong recovery in the world economy, which is expected to translate into additional appetite for riskier assets.
Technical levels
At the moment, the index is falling 0.11% to 90.34 and faces initial support at 90.25 (weekly low on Feb 10) followed by 90.04 (weekly low on Jan 21) and then 89.20 (low on Jan 6, 2021 ). On the upside, a breakout of 91.60 (2021 high on Feb 5) would open the door to 91.74 (100-day SMA) and finally 92.46 (23.6% Fibonacci from the 2020-2021 dip).
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