- The DXY index extends Friday’s gains and advances to the 92.30 area.
- Fed Chairman Powell said the US economy is at a “tipping point.”
- US 10-year yields relax a bit to the 1.65% area.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, extends the gains recorded at the end of last week around the region of 92.30 / 35.
DXY US Dollar Index focuses attention on returns and data
The DXY index starts the week with a positive tone and seeks to distance itself further from last week’s lows near the 92.00 region.
The best tone around the dollar occurs despite a drop in US yields, with the yield on the key 10-year bond hovering around 1.65% and under some pressure after falling back from previous highs near 1.68%.
Collaborating with the buying bias in the dollar, President Powell said in an interview published Sunday that the US economy is at a “tipping point” while the door remains open to further improvement in growth and job creation. Powell justified the better growth prospects in both monetary and fiscal support, as well as the robust launch of vaccines.
There are no relevant macroeconomic data releases in the US at the beginning of the week, although the focus is expected to be on Tuesday’s release of average CPI inflation figures.
What can we expect around the USD?
The DDXY index has been losing momentum after hitting yearly highs near 93.50 at the end of March, although sellers have so far failed to drag it below the 92.00 region. The DXY index now appears to be under downward pressure as investors appear to have already priced in the US reflation trade and the high rate of vaccination in the country. 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: Inflation Figures for March (Tuesday) – President Powell’s Speech, Fed Beige Book (Wednesday) – Retail Sales, Initial Jobless Claims, Philadelphia Fed Index, Industrial Production (Thursday) – Home Home, Home Permits construction, preliminary consumer sentiment (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 gaining 0.14% on the day, trading at 92.31. A break above 93.43 (March 31 high), would expose 94.00 (round level) and finally 94.30 (November 4 high). On the other hand, the next support is at 91.99 (April 8 low), followed by 91.55 (50-day SMA) and 91.30 (March 18 low).
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