- DXY rises to the 90.30 zone on Thursday.
- The US CPI increased 3.8% year-on-year in May, beating estimates.
- Initial claims increased by 376,000 from the previous week.
The dollar return to positive territory and push the US Dollar Index (DXY) to new highs around 90.30.
The US dollar index rises on higher inflation
The index resumes the uptrend after the initial dip to near the 90.00 level in the second half of the week.
The buoyant tone of the dollar comes after inflation figures in the United States surprised to the upside in May. In fact, the CPI rose 5.0% over the previous year, while the underlying CPI advanced 3.8%, both figures exceeded forecasts.
The additional buying interest in the dollar came in response to another figure below 400,000 weekly claims, this time at 376,000 (previous 385,000).
Meanwhile, price action around the index remains volatile amid the narrative of the US economic rebound, yields, the launch of the vaccine, and the sustainability of higher inflation in the coming months.
What to look for around USD
The index appears to have found a stiff barrier at the 90.50 / 60 zone for the time being. The disappointing NFP figures for May are now buttressing the rumor that it is still premature for the Fed to start the tapering conversation. Despite the recent strength of the dollar, the outlook for the currency remains negative in the long term. This view is supported by the persistent mega-dovish stance of the Federal Reserve (until “further substantial progress” in inflation and employment is made) for the foreseeable future and growing optimism about a strong global economic recovery.
Technical levels
Now the index is gaining 0.02% at 90.15 and a breakout of 90.62 (June 4 weekly high) would open the door to 90.90 (May 13 weekly high) and finally 91.05 (100-day SMA). On the other hand, the next support is at 89.53 (monthly low of May 25) followed by 89.20 (low of January 6, 2021) and then 88.94 (monthly low of March 2018).
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