US dollar DXY index moves to 4-week highs near 91.30

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  • The DXY index extends the rise and advances to 91.30.
  • US 10-year yields hold range above 1.40%.
  • The IBD / TIPP index and some Fed speeches 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 recent gains above the 91.00 level and reaches new multi-week highs near the 91.30 region.

US Dollar Index Strengthens on Yields and Data

The DXY index marks its third day in a row with earnings so far and extends the recent breakout of the key region at the 91.00 level on Tuesday.

In fact, the dollar remains well positioned in a context of higher inflation expected in the coming months, even though recent Fed speeches rejected that scenario.

Supporting the above, Recent US macroeconomic data results continue to signal strong performance of the US economy versus other G-10 countries in the coming months, all backed at the same time by the robust pace of the vaccine launch.

As for US data, the IBD / TIPP index will be the only release later during the American session, along with speeches by L. Brainard of the FOMC and M. Daly of the San Francisco Fed.

What can we expect around the USD?

The DXY index manages to regain strength and finally break above the 91.00 level. The reversal of the recent dollar weakness came in tandem with a sharp rebound in bond yields to the levels last recorded a year ago. While reflation trading and vaccine optimism continue to limit bullish attempts on the dollar, bouts of concern about a pickup in inflation stemming from expected additional fiscal stimulus could provide some pockets of strength in the dollar for the lower. moment. Against this, the occasional rise in the dollar should remain short-lived amid the overall bearish outlook for the currency in the medium / long term. This, in turn, is reinforced by the Fed’s strengthened mega-accommodative stance until “further substantial progress” is observed, persistent rumors of additional fiscal stimulus, and prospects for a strong recovery in the world economy, which they are considered to support the best confidence in risk appetite.

Key events this week in the US: ADP Report, ISM Non-Manufacturing PMI and Fed Beige Book (Wednesday), Initial Jobless Claims and Powell Speech (Thursday), NFP Non-Farm Payrolls (Friday).

Eminent Background Issues: 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? 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 0.21% on the day, trading at 91.22. A breakout of 91.33 (March 2 high), would open the door to 91.60 (February 5 high) and finally 92.46 (23.6% Fibonacci retracement of the 2020-2021 dip). On the other hand, the next support is at 89.68 (February 25 low), followed by 89.20 (January 6 low) and 88.94 (March 2018 low).

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