- The DXY index reverses Friday’s gains above the 91.00 level.
- US yields are struggling to find direction above 1.60% so far.
- The ISM Manufacturing PMI will focus investors’ attention at the start of the American session.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, has encountered a decent hurdle around the 91.40 level at the beginning of the week.
DXY US Dollar Index focuses attention on data
The DXY index reverses initial optimism and returns previous gains to the 91.40 area despite consistent performance of US yields and in the context of growing optimism about the US economic rebound.
In fact, the latter continues backed by better than expected results on national fundamentals in recent weeks, as well as the solid pace of the vaccination campaign.
In today’s U.S. economic calendar, all eyes will be on the ISM Manufacturing PMI at the beginning of the American session, followed by the publication of Markit’s final manufacturing PMI for the month of April. Also, Fed Chairman Jerome Powell has a speech scheduled.
What can we expect around the USD?
The sharp retracement in the DXY index in April appears to have found decent support in the 90.40 region (April 29), with a fairly strong bounce above the 91.00 level on the last trading day of the month. Optimism regarding the imminent full reopening of the US economy has been gaining more traction of late, supported at the same time by the relentless strength of national fundamentals, the strong launch of the vaccination campaign and the resurgence of market rumors regarding an earlier-than-expected adjustment in bond buying by the Fed. The latter occurs despite the Fed’s efforts to lower this scenario, at least for the next few months.
Key events in the US this week: ISM Manufacturing PMI (Monday) – Factory Orders (Tuesday) – ADP Report, ISM Non-Manufacturing PMI (Wednesday) – Initial Unemployment Claims (Thursday) – NFP Non-Farm Payrolls, Unemployment Rate (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 down 0.04% on the day, trading at 91.25. The next support is at 90.42 (April 29 low), followed by 89.68 (February 25 low) and 89.20 (January 6 low). On the other hand, a breakout of 91.42 (April 21 high), would open the door to 91.70 (50-day SMA) and finally 91.97 (200-day SMA).
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