- The DXY index returns Wednesday’s rally and resumes the decline.
- US 10-year yields consolidate below the 1.70% level so far.
- Initial US jobless claims and Powell’s speech stagnate on today’s economic calendar.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, returns to negative territory around the region of 92.30 in the second half of the week.
DXY US Dollar Index focuses attention on data and returns
The DXY index rapidly retreated from Wednesday’s rise and resumes decline at lower end of recent range and near the key support at the 92.00 level.
Loss of bullish traction in US yields In recent days, particularly in the benchmark 10-year bond, the recent bullish movement in the dollar appears to have affected.
Furthermore, the narrative of a US economic recovery seems somewhat exhausted and priced in by investors, who are now appear to have shifted their focus to Europe and improved vaccination prospects.
Nothing new came from the release of the FOMC minutes on Wednesday, where The Committee reiterated the absence of a rush to modify current monetary conditions, adding that the current pandemic is a continuing source of uncertainty.. In addition, members view inflation risks as balanced, while improving US growth prospects was the main reason behind the upward movement in US yields.
Regarding US data, weekly jobless claims will be released today, followed by President Powell’s participation in a panel discussion on “The Global Economy” at the International Monetary Fund Debate.
What can we expect around the USD?
Bullish momentum in the US dollar wavered below the 93.50 region in recent days, causing a corrective decline near the round 92.00 level. The dollar is now under some downward pressure, as reflation trading and the idea of higher inflation in the US in the coming months have lost some steam. Furthermore, the Fed’s mega-accommodative stance (until “further substantial progress” is made in inflation and employment) and hopes for a strong global economic recovery (now postponed to the end of the year) remain a source of support for risk appetite and have the potential to reduce the dollar’s bullish momentum in the second half of the year.
Key events in the US this week: Initial Unemployment Claims, Powell Speech (Thursday) – Producer Prices (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? Future of the Republican Party after Trump’s acquittal.
Relevant levels of the US dollar DXY index
At the time of writing, the DXY index is shedding 0.14% on the day, trading at 92.29. Next support is at 92.13 (April 7 low), followed by 91.49 (50-day SMA) and 91.30 (March 18 low). On the other hand, a break above 93.43 (March 31 high) would expose 94.00 (round level) and finally 94.30 (November 4 high).
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