- The DXY index remains under pressure below the 90.00 level.
- US 10-year yields rose to the 1.65% region on Wednesday.
- The FOMC minutes will be released during today’s American session.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, moves by the lower limit of the recent range close to monthly lows in the region of 89.70 / 65.
DXY US Dollar Index focuses attention on FOMC, inflation and risk trends
The DXY index struggles to find direction after bottoming out at the 89.70 zone early in the European session on Wednesday.
In fact, Dollar remains under pressure despite rally in US 10-year yields to the region of 1.65% and the resurgence of rumors about high inflation in the coming months.
In the meantime, investors continue to favor positioning in favor of risk appetite, which has been exacerbated lately in response to confirmation by various Fed officials of the transitory nature of high inflation and the mega-accommodative stance of the Federal Reserve.
Regarding US data, the MBA’s weekly mortgage applications must be released today and the EIA report on US crude oil inventories. However, the release of the minutes The FOMC will be the highlight of the event on Wednesday, with the center of debate revolving around the prospects for higher inflation and the possible timing of a reduction in the bond purchase program.
What can we expect around the USD?
The DXY index has completely reversed the upward movement seen during March and is back below the psychological level of 90.00 despite the waiver of US bond yields to move lower. Looking at the bigger picture, the negative stance on the coin seems to prevail among market participants. This view has been exacerbated after the April NFP nonfarm payroll report, at the same time damaging sentiment around the imminent full reopening of the US economy, which in turn is underpinned by the relentless strength of the 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: FOMC Minutes (Wednesday) – Initial Applications, Philadelphia Fed Index (Thursday) – Preliminary Manufacturing PMI, Existing Home Sales (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 0.03% on the day, trading at 89.80. The next support is at 89.68 (Feb 25 low), followed by 89.20 (Jan 6 low) and 88.94 (March 2018 low). On the other hand, a breakout of 90.90 (May 11 high) would open the door to 91.06 (100-day SMA) and finally 91.43 (May 5 high).
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