- The DXY index retraces from 4-day highs past the 93.00 level.
- Investors remain focused on Powell and QE reduction.
- The US PCE, trade data, and the University of Michigan final index also feature prominently on today’s economic calendar.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, returns part of recent gains and falls back to the 93.00 area on Friday.
DXY Index focuses on Powell and the data
The DXY index managed to reverse four consecutive daily declines and closed with decent gains above the 93.00 level on Thursday, sustained mainly by positive comments from the Fed and following better-than-expected results from another revision of US GDP during the April-June period.
In fact, J. Bullard of the St. Louis Fed reiterated that expects to finish tapering by the end of the first quarter of 2022. He also expressed concern about a “nascent housing bubble.” In addition, E. George of the Kansas City Fed and R. Kaplan of the Atlanta Fed said that the Fed you should start looking at the bond buying program sooner rather than later (October?).
Helping with the rise in the dollar, yields on the key US 10-year bond rose to new highs around the 1.38% level.
Turning to US data, inflation figures measured by the PCE will be the focus of investors’ attention, followed by personal income / spending data, trade balance results and the final consumer sentiment indicator for the month. current.
Investors, meanwhile, will closely monitor the President Powell’s speech at the Jackson Hole Symposium on “The Economic Outlook”, always with the QE setting at the center of the debate.
What can we expect around the USD?
The DXY index’s corrective move appears to have found solid support at the 92.80 region so far. The weekly pullback in the DXY index comes in tandem with the improvement in the risk complex, all amid mounting speculation surrounding the QE decline ahead of President Powell’s keynote speech at the Jackson Hole event. Meanwhile, support for the dollar is supported by concerns about the coronavirus, high inflation and higher real yields.
Key events in the US this week: Jackson Hole, PCE Symposium, Personal Income / Spending, Goods Trade Balance, Final Consumer Sentiment (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. US real interest rates against Europe. Debt ceiling debate. Possible suggestion on reducing QE at the Jackson Hole Symposium. Geopolitical risks derived from Afghanistan.
Relevant levels of the US dollar DXY index
At the time of writing, the DXY index is down 0.06% on the day, trading at 92.98. Next support is at 92.80 (Aug 24 low), followed by 92.47 (Aug 13 low) and 91.78 (Jul 30 low). On the other hand, a break above 93.72 (August 20 high), would open the door to 94.00 (round level) and 94.30 (November 4, 2020 high).
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