US Dollar DXY Index Looks Firmer, Approaching 91.00 Level

• The DXY index extends Tuesday’s gains and moves to weekly highs.
• The higher yields offset the recent upbeat sentiment in risk appetite.
• The release of retail sales and industrial production data stands out on the US economic calendar.

The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, extends the rise and is approaching the key level of 91.00.

DXY US Dollar Index focuses attention on data and returns

The DXY index moves with a positive tone and rises for the second day in a row on Tuesday, overcoming lower resistance levels such as the 21-day SMA at 90.63 and the 10-day SMA at 90.75.

The Upward movement in US yields has sustained the rally of the US dollar Recently. In fact, the key 10-year benchmark returns surpassed the 1.33% level on Tuesday, area last seen in February 2020, as investors continue to assess the rebound in inflation in the face of additional fiscal stimulus and higher energy prices.

When it comes to US economic data, the focus will be on January Retail Sales, Industrial Production Figures and FOMC Minutes. Other second-tier data includes weekly MBA mortgage applications, monthly business inventories, capacity utilization, the API report, and the NAHB index.

Additionally, Richmond Fed Governor T. Barkin and Boston Fed Governor E. Rosengren have speeches scheduled.

What can we expect around the USD?

The dollar’s downside corrective move appears to have found decent support near the 90.30 / 20 region. Dollar price action has regained its positive correlation with US yields, allowing the current rally near the 91.00 level. However, bullish attempts on the dollar should remain short-lived, amid the fragile overall outlook for the currency in the medium / long term. Meanwhile, the current 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 are anticipated. expected to become an additional appetite for riskier assets.

Key events this week in the US: January Retail Sales, Industrial Production and FOMC Minutes Wednesday. Initial jobless claims and the Philadelphia Fed index on Thursday before preliminary PMIs on Friday.

Eminent Background Topics: Trade conflict between the United States and China under the Biden administration. Trump’s impeachment. Reduction of speculation in the face of economic recovery. Real US interest rates versus Europe. Could US fiscal stimulus cause overheating? Future of the Republican Party after Trump’s acquittal.

Relevant levels of the US dollar DXY index

At the time of writing, the DXY index is gaining 0.26% on the day, trading at 90.74. A break above 91.55 (100-day SMA), would open the door at 91.60 (Feb 5 high) and at 92.46 (23.6% Fibonacci retracement of 2020-2021 dip). On the other hand, initial support is at 90.22 (Feb 16 low), followed by 90.04 (Jan 21 low) and 89.20 (Jan 6 low).