- The DXY index is limited near 92.40 on Monday.
- US 10-year yields remain depressed near the 1.40% region.
- The Chicago Fed index stands out on today’s economic calendar.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, moves lower on Monday and heads to the 92.00 level during the European session.
US dollar index faces next hurdle at 92.50
The DXY index seeks to extend to the recent strong advance, although seems to have encountered fairly solid resistance near the 92.50 region for the moment.
It’s worth remembering that sentiment around the dollar improved dramatically after the FOMC last Wednesday open the door to “talk about adjusting” its monetary policy ahead of schedule by most investors, while the “dot chart” now points to two interest rate hikes sometime in late 2023.
In addition to the above, further improvement in key fundamentals and higher inflation could even lead to a rate hike in late 2022.
The recent strength in the dollar has also come in response to comments from St. Louis Fed Chairman J. Bullard in an interview with CNBC on Friday, when defended the recent optimistic turn in the Fed message.
When it comes to US data, the Chicago Fed National Activity Index will be the highlight of the day, with the Fed’s J. Williams scheduled speech.
What can we expect around the USD?
The DXY index has moved above the 92.00 region as investors continue to adapt to the recent upbeat message from the FOMC at its meeting on Wednesday. The image that talks on easing stimulus could start earlier than anticipated and higher rate sentiments by the end of 2023 fuels the shift towards the dollar and the rise of the DXY index to levels last seen in mid-April. . However, the still unchanged view of higher “transitory” inflation, and thus the continuation of the pessimistic stance by the Federal Reserve, has the potential to moderate the current momentum of the dollar. A sustained break above the critical 200-day SMA should shift the dollar’s outlook to a more constructive one.
Key events in the US this week:President Powell’s Testimony, Existing Home Sales (Tuesday) – New Home Sales, Preliminary Manufacturing PMI (Wednesday) – First Quarter Final GDP, Durable Goods Orders, Initial Jobless Claims (Thursday) – Underlying PCE, Sentiment final consumer for June (Friday).
Eminent Background Topics: Biden’s bill to boost infrastructure worth nearly $ 6 trillion. 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 down 0.28% on the day, trading at 92.06. The next support is at 91.51 (200-day SMA), followed by 91.10 (100-day SMA) and 89.53 (May 25 low). On the other hand, a rutpur of 92.40 (June 18 high), would open the door to 92.46 (23.6% Fibonacci retracement from the 2020-2021 drop) and finally 93.43 (March 21 high).
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