US Dollar DXY Index Flirts With Highs Near 90.60 Awaiting Powell

• The DXY index extends the rise and tests the 90.60 zone.
• Initial jobless claims increased by 965,000 over the past week.
• Powell, chairman of the Fed, will focus the attention of investors during the American session.

He US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, moves to new 2-day highs in the region of 90.60 at the start of the American session on Thursday.

DXY US Dollar Index Holds Firm Ahead of Powell

The DXY index maintains an optimistic tone and spreads wednesday earnings, always staying well above the key barrier at the 90.00 level.

The selling bias around the euro seems to support the dollar, mainly after the ECB has expressed concern about the level of the exchange rate in a context of low inflation and downside risks to the economic outlook, based on the ECB minutes released today and recent ECB language.

Also supporting the DXY index appears the weekly rise in initial jobless claims to levels last seen in August, close to the 1 million threshold, as the impact of the coronavirus pandemic appears to be hitting the job market again.

Later in the day Jerome Powell, Chairman of the Fed, will participate in an online event. Additionally, Atlanta Fed Governor R. Bostic and Dallas Fed Governor R. Kaplanm have speeches scheduled.

Also noteworthy is President-elect Joe Biden’s speech, where he is expected to provide more details on a new stimulus package.

What can we expect around the USD?

The DXY index has regained buying interest after bottoming out in the 89.20 region in the first trading week of the new year and has managed to advance to near the 90.70 level earlier this week where relevant resistance has emerged. The recovery in US yields continues to support the dollar, as investors continue to perceive a possible pick-up in inflationary pressure / expectations in response to the more likely increase in fiscal stimulus under a Democratic White House. However, the outlook for the dollar remains fragile in the short / medium term for the time being amid massive fiscal and monetary stimulus in the US economy, the “lower for longer” stance from the Federal Reserve and the prospects for a strong recovery in the global economy.

Relevant levels of the US dollar DXY index

At the time of writing, the DXY index is gaining 0.18% on the day, trading at 90.52. A breakout of 90.72 (high of January 11), would open the door to 91.01 (high of December 21, 2020) and finally to 91.23 (high of December 7, 2020). On the other hand, immediate support is at 89.20 (January 6 low), followed by 88.94 (March 2018 low) and 88.25 (February 2018 low).