- The DXY Index regains some composure after falling to multi-week lows.
- US 10-year yields are rising and approaching the 1.65% area.
- Advanced first-quarter GDP figures, weekly jobless claims, and housing data stand out on today’s economic calendar.
The US dollar DXY index, which measures the strength of the dollar against a basket of the main currencies, recovers the smile and bounces off two-month lows near the 90.40 level Thursday.
US dollar DXY index weakens after Fed
The DXY index remains largely defensive so far this month, losing ground for the fourth week in a row so far and about to close the first month with losses after three consecutive monthly increases.
The pessimistic tone of the FOMC on Wednesday exacerbated the selling bias around the dollar, particularly after President Powell once again ruled out any modifications to the Fed’s guidance and to the bond buying program for the foreseeable future, all despite positively assessing the pace of the US economic recovery.
In the meantime, Investors continue to favor risk appetite and continue to watch the progress of the vaccination campaign and the economic recovery outside the US, all contributing to persistent bearish sentiment around the dollar.
When it comes to US data, the focus will be on first quarter GDP figures, followed by weekly jobless claims and pending home sales.
What can we expect around the USD?
The April pullback in the DXY index remains strong despite the current rally from the 2-month lows in the 90.40 region. The downward movement of the dollar follows the widespread decline in US yields and the loss of enthusiasm in the US reflation trade and the high rate of vaccination in the country. Also weighing on the dollar is the Fed’s mega-accommodative stance (until “further substantial progress” is made in inflation and employment) and hopes of a strong global economic recovery, all becoming a source of support for the economy. risk appetite and have the potential to reduce the dollar’s bullish momentum in the coming months.
Key events in the US this week: Preliminary Q1 GDP, Initial Weekly Unemployment Claims (Thursday) – Core PCE, Personal Income / Spending, University of Michigan Final Consumer Sentiment Index for April (Friday).
Eminent Background Issues: Biden’s bill to boost infrastructure worth about $ 3 trillion. 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?
Relevant levels of the US dollar DXY index
At the time of writing, the DXY index is gaining 0.07% on the day, trading at 90.65. A break above 91.42 (April 21 high), would open the door to 91.66 (50-day SMA) and 91.99 (200-day SMA). On the other hand, the next support is at 90.42 (April 29 low), ahead of 89.68 (February 25 low) and then 89.20 (January 6 low).
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