- DXY remains mired in negative territory.
- The waning talk of inflation weighs on the dollar.
- Home construction contracted 9.5% month-on-month in April.
The US Dollar Index (DXY), which measures the dollar against a set of its main rivals, remains under pressure in the region below 90.00 for the time being on Tuesday.
US dollar index weakens due to risk appetite
The index exacerbated the downward bias on Tuesday in response to comments from FOMC officials late Monday, who reiterated once again that high inflation in the coming months should be considered transitory.
In addition, the absence of bullish traction in US yields also contributes to the downtrend of the dollar, all amid the persistent improvement in the risk universe.
In the US data space, new homes contracted 9.5% monthly in April (1,569 million units), while building licenses expanded only 0.3% month-on-month (1.76 million units) . Later in the session, the API will report on weekly supplies of crude oil from the United States.
What to look for around USD
The index has completely faded from the rally seen during March and is back below the psychological level near 90.00 despite the reluctance of US yields to decline. Looking at the bigger picture, the negative stance on the coin seems to prevail among market participants. This view has been exacerbated after the April payrolls, at the same time damaging sentiment around the imminent full reopening of the US economy, which in turn is underpinned by the relentless strength of national fundamentals, the solid vaccine launch and once again the resurgence of the market buzz regarding an early overhaul. The latter occurs despite the Fed’s efforts to lower this scenario, at least for the next few months.
Relevant levels
Now, the index is shedding 0.39% to 89.84 and faces the next support at 89.69 (May 18 monthly low) followed by 89.20 (January 6 low) and then 88.94 (March 2018 monthly low). On the other hand, a breakout of 90.90 (weekly high on May 11) would open the door to 91.06 (100-day SMA) and finally 91.43 (weekly / monthly high on May 5).
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