- The DXY index extends the rally above the 91.00 level.
- US yields rise and support the dollar.
- The FOMC is widely expected to maintain its accommodative stance.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, rises to new 3-day highs above the 91.00 level on Wednesday.
US Dollar DXY Index Strengthens Ahead of FOMC
The DXY index extends its weekly recovery and records earnings for the third day in a row Wednesday amid a rebound in US yields.
In fact, 10-year US bond yields recover close to the 1.65% level, widening the rebound from recent lows in the 1.53% area.
In the meantime, the FOMC’s decision will be this week’s highlight event. However, the market consensus widely expects the meeting to go unnoticed, as the Committee is expected to keep monetary conditions unchanged. This view is widely supported by the latest comments from President Powell and other FOMC members, who reiterated that the Fed is in no rush to change its current status quo, let alone start talks on a gradual tightening of monetary policy.
As for the US data, the weekly MBA mortgage applications data, the advanced figures for the balance of trade in goods, the preliminary wholesale inventories for the month of March and the EIA weekly report on crude oil supplies.
What can we expect around the USD?
The April pullback in the DXY index appears to have found some support in the 90.70 region for the time being, always due to the widespread pullback in US yields and the loss of enthusiasm in US reflation trading and the high vaccination rate 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: FOMC Meeting (Wednesday) – 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 0.19% on the day, trading at 91.06. A break above 91.67 (50-day SMA), would open the door to 92.02 (200-day SMA) and 93.43 (March 31 high). On the other hand, the next support is at 90.68 (April 26 low), ahead of 89.68 (February 25 low) and then 89.20 (January 6 low).
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