- The DXY index corrects lower and revisits the 92.70 region.
- The better mood in the risk complex forces the dollar to return ground.
- Initial jobless claims, existing home sales, and the CB’s leading indicator stand out on today’s economic calendar.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, extends the rejection from multi-month highs beyond the 93.00 level.
DXY index focuses on data and the ECB
The DXY index loses ground for the second day in a row Thursday following improved risk appetite sentiment and despite the recent recovery in US yields.
In fact, yields on the key US 10-year bond briefly tested the 1.30% region on Wednesday after falling as low as the 1.13% area earlier in the week.
Investors, meanwhile, seem to favor risk appetite to the detriment of the safe haven US dollar despite the persistent advance of the Delta variant coronavirus worldwide, which has the potential to pour cold water on global growth prospects.
When it comes to US data, the focus will be on initial weekly jobless claims, the Chicago Fed index, existing home sales and the leading CB index for the month of June.
In addition, market participants will be closely watching the ECB event, with the PEPP and a likely review of the central bank’s future orientation taking center stage.
What can we expect around the USD?
The DXY index is under some selling pressure after hitting new 3-month highs beyond the 93.00 level. The latest positive move in the index was sustained primarily by the resumption of risk aversion in response to the resurgence of coronavirus concerns. The positive stance in the dollar, meanwhile, continues to be supported by the strong pace of the economic recovery, higher-than-expected inflation figures and growing rumors of rate hikes / QE cuts ahead of schedule.
Key events in the US this week: Initial Jobless Claims, Existing Home Sales (Thursday) – Preliminary Manufacturing and Services PMI for July (Friday).
Eminent Background Topics: Biden’s multi-million dollar plan to support infrastructure and families. 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 down 0.06% on the day, trading at 92.71. Next support is at 92.46 (23.6% Fibonacci retracement of the November-January move), followed by 92.00 (July 6 low) and 91.51 (June 23 low). On the upside, a break above 93.19 (July 21 high), would open the door to 93.43 (March 21 high) and finally 94.00 (round level).