- The DXY Index gains some traction to the upside near 89.50 on Wednesday.
- US 10-year yields continue to navigate below 1.60%.
- The MBA mortgage applications, the EIA report, and several Fed speeches feature prominently on today’s economic calendar.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, manages to reverse the recent downward movement to new monthly lows near the 89.50 level.
US dollar DXY index remains fragile and closer to annual lows
So far, the DXY index rebounds after two consecutive daily pullbacks, including falling to fresh monthly lows near the 89.50 level reached on Tuesday, and records decent gains in the 89.70 zone after the start of the European session.
The lower US yields and some disappointing US data. in recent days they have put the dollar under further downward pressure, at the same time exacerbated by improving sentiment around risk appetite.
On the US data, MBA mortgage application data and the EIA weekly report on crude oil supplies will be released today. Additionally, R. Quarles from the FOMC will speak on the “Economic Outlook” later in the session.
What can we expect around the USD?
The DXY index remains under pressure in the zone of monthly lows. Looking at the bigger picture, the negative stance on the dollar appears to prevail among market participants as speculation of higher inflation in the medium term now appears to have lost momentum and the narrative of superior US economic performance appears be almost discounted in price. Driving bearish sentiment on the dollar is also further confirmation of the Fed’s mega-accommodative stance for the foreseeable future, based on recent FOMC minutes and Fed speeches.
Key events in the US this week: Preliminary Q1 GDP, Initial Jobless Claims, Durable Goods Orders (Thursday) – Core PCE, Personal Income / Spending, University of Michigan Final Consumer Sentiment Index (Friday).
Eminent Background Issues: Biden’s bill to boost nearly $ 4 trillion worth of infrastructure. 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 up 0.05% on the day, trading at 89.71. A breakout of 90.90 (May 11 high) would open the door to 91.07 (100-day SMA) and 91.43 (May 5 high). On the other hand, the next support is at 89.53 (May 25 low), followed by 89.20 (January 6 low) and 88.94 (March 2018 low).