US dollar DXY index clings to gain above 90.00 level

• The DXY index is looking to reverse Friday’s post-NFP payroll pullback.
• US 10-year yields start the week with small gains near 1.57%.
• The Fed will release the April consumer credit change.

The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, seeks to reverse Friday’s decline and begins the week slightly in positive territory and above the key level of 90.00.

DXY US Dollar Index Now Turns Attention to Data

The dollar seems firm at the beginning of the week and regains some ground lost after sharp setback on Friday after disappointing NFP nonfarm payrolls. It is worth noting that the economy added 559,000 jobs in May, less than expected, while the unemployment rate fell to 5.8%. Other data showed factory orders also below estimates, contracting to 0.6% monthly in April.

US 10-year yields pick up a bit from Friday’s lows and move around 1.57%, as market participants continue to absorb the recent economic calendar.

Meanwhile, the dollar remains under pressure as the latest NFP payroll figures now allow the Fed to buy additional time before any talk about tightening its monetary policy. In fact, recent US labor market data somewhat reinforces the Fed’s pessimistic message.

On the latter, L. Mester of the Cleveland Fed advocated for more confirmation of the data before any modification of the current asset purchase program.

During the American session today, the Fed will publish the change in consumer credit for the month of April, while the focus of attention later this week will be on the inflation figures measured by the CPI.

What can we expect around the USD?

The DXY index appears to have encountered a stiff barrier in the 90.50 / 60 region for the time being. The disappointing NFP figures for May now underpin the Fed’s narrative that it is still premature to start talks about phasing out its bond purchase program. Despite the recent strength of the dollar, the outlook for the currency remains negative in the long term. This view is supported by the Federal Reserve’s persistent mega-accommodative stance (until “further substantial progress” in inflation and employment is made) for the foreseeable future and growing optimism about a strong global economic recovery.

Key events in the US this week: change in consumer credit (Monday) – Trade balance (Tuesday) – Inflation figures measured by the CPI, initial jobless claims (Thursday) – Consumer sentiment in June (Friday).

Eminent Background Topics: Biden’s bill to boost infrastructure worth nearly $ 6 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 0.08% on the day, trading at 90.20. A breakout of 90.62 (June 4 high), would open the door to 90.90 (May 13 high) and finally 91.05 (100-day SMA). On the other hand, the next support is at 89.53 (May 25 low), followed by 89.20 (January 6 low) and 88.94 (March 2018 low).