- The DXY index is trading at the lower end of the recent range below 93.00.
- The dollar remains under pressure after Powell’s speech on Friday.
- Pending home sales and the Dallas Fed index 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, moves within a narrow range near recent lows in the 92.60 zone.
DXY Index focuses attention on data
The DXY index starts the week with a consolidation status near the 92.60 region, as market participants continue to weigh in on Fed Chairman Jerome Powell’s speech Friday at the Jackson Hole Symposium.
President Powell remained cautious about when the Federal Reserve plans to start cutting its bond buying program.. He suggested that the reduction in QE could start this year, adding that the US economy appears to be closer to “further substantial progress”, although more needs to be done regarding the labor market.
Powell also made it clear that the beginning (and the end of the QE program) is completely unrelated to the beginning of the rate hike cycle of interest, which the market consensus still places sometime in late 2022.
Regarding the US data, pending home sales and the manufacturing indicator published by the Dallas Fed will be released today.
What can we expect around the USD?
Powell’s cautious tone in his speech at the Jackson Hole Symposium caught the USD bulls off guard, spawning a rather notable corrective move in the DXY index to multi-day lows as a consequence. Meanwhile, support for the dollar is expected to be supported by concerns around the coronavirus, high inflation and higher real yields, while upcoming key data is expected to play a crucial role as the start of the adjustment of the dollar. QE.
Key events in the US this week: Pending Home Sales (Monday) – House Price Index, CB Consumer Confidence (Tuesday) – ADP Report, ISM Manufacturing (Wednesday) – Trade Balance, Initial Jobless Claims, Factory Orders (Thursday) – Non-Farm Payrolls NFP, ISM Non-Manufacturing (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. US real interest rates against Europe. Debt ceiling debate. Geopolitical risks derived from Afghanistan.
Relevant levels of the US dollar DXY index
At the time of writing, the DXY index is down 0.01% on the day, trading at 92.67. The next support is at 92.59 (August 30 low), followed by 92.47 (August 13 low) and 91.78 (July 30 low). On the other hand, a break above 93.72 (August 20 high), would open the door to 94.00 (round level) and 94.30 (November 4, 2020 high).
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