- The DXY index is trading in the zone of the recent highs in the 93.00 region.
- Risk aversion lingers on renewed fears surrounding COVID-19 on Tuesday.
- US housing data and the weekly API report 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, extends the recovery and seeks to advance above the round level of 93.00.
US dollar DXY index moves higher on growing risk aversion
The DXY index moves in the region of 3-month maximums around the 93.00 level, backed by persistent risk aversion and declining US yields.
In fact, the rapid and unexpected spread of the Delta variant The coronavirus has lent an additional boost to risk aversion and continues to weigh on investor sentiment while threatening to impact global growth prospects.
In the same way, key 10-year US benchmark yields keep moving down and they are already trading at levels last seen in February around the 1.20% zone.
On the economic front, data on new home starts and building permits in the US will be released today, followed by the usual weekly API report on US crude inventories.
What can we expect around the USD?
The recovery in the DXY index has already reached the key barrier of 93.00, sustained mainly by the resumption of risk aversion. The positive stance in the DXY index, meanwhile, remains underpinned by the strong pace of the economic recovery, higher-than-expected inflation figures, and growing rumors of earlier-than-expected rate hikes.
Key events in the US this week: Building Permits, Housing Starts (Tuesday) – MBA Mortgage Applications (Wednesday) – Initial Jobless Applications, Existing Home Sales (Thursday) – Preliminary Manufacturing and Services PMI for July (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. 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 0.19% on the day, trading at 93.01. A breakout of 93.43 (March 21 high) would open the door to 94.00 (round level) and 94.30 (November 4 high). On the other hand, the next support is at 92.46 (23.6% Fibonacci retracement of the November-January movement), followed by 92.00 (July 6 low) and 91.51 (June 23 low).