US dollar DXY index in a narrow range just below the 90.40 level

• The DXY index struggles to find a direction around 90.30 on Monday.
• US 10-year yields are moving lower and approaching the 1.60% level.
• The publication of the New York Empire State Index and the NAHB 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, alternates gains with losses just below the 90.40 level during the European session on Monday.

DXY US Dollar Index focuses attention on returns and data

DXY index moves by the lower end of the recent range, amid the alternation in risk trends and the persistent corrective decline in US 10-year benchmark bond yields.

In the meantime, superior US economic performance coupled with renewed market expectations for higher inflation over the next few months (particularly after the April CPI release last week) seem to limit further selling pressure around the US dollar for the time being, leaving the 90.00 region on the DXY index as quite a strong support for dollar bears.

Regarding the US data, today highlights the publication of the Empire State of New York index and the NAHB index.

What can we expect around the USD?

The DXY index has completely reversed the upward movement seen during March and is back near 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: NAHB Index (Monday) – Building Permits, Home Starts (Tuesday) – 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 gaining 0.06% on the day, trading at 90.35. Next support is at 89.98 (May 11 low), followed by 89.68 (Feb 25 low) and 89.20 (Jan 6 low). On the other hand, a breakout of 90.90 (May 11 high) would open the door to 91.07 (100-day SMA) and finally 91.43 (May 5 high).