- The DXY index corrects lower after hitting highs around 99.75.
- US yields are also leaving the area of recent highs.
- Initial jobless claims data and several Fed speeches stand out on today’s economic calendar.
The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, gives back part of the recent gains and returns to the region of 99.50 during the European session on Thursday.
DXY index still pointing to 100.00
After five consecutive daily advances, the DXY index is now under some pressure after reaching highs on Wednesday in the 99.75/80 region, always in the context of a slight improvement in the risk complex and a period of weakness in US yields.
The DXY index kept the upward bias unchanged on Wednesday, although pulled back from new highs after FOMC minutes failed to surprise market participantsas the aggressive tone was in line with that of the March 16 meeting statement.
On the latter, the FOMC minutes released more details about the deregistration of the QE program. TO Beginning in May, the Committee will reduce the balance by $60 billion in bonds and $65 billion in MBS. Additionally, many participants priced in a 50 basis point rate hike last month, though ultimately opted for a smaller increase in response to uncertainty over the war in Ukraine.
Turning to US data, February Initial Jobless Claims and Consumer Credit Change will be released today. In addition, St. Louis Fed Governor J. Bullard, Atlanta Fed Governor R. Bostic, Chicago Fed Governor C. Evans and New York Fed Governor J.Williams, have speeches scheduled during the session.
What can we expect around the USD
The DXY index remains firm and is slowly approaching the psychological barrier at the 100.00 level. So far, the very short-term price action in the dollar remains dictated by geopolitics, while the case for a stronger dollar in the medium/long term remains well supported by the current narrative of high inflation, a possible more aggressive Fed tightening stance and the strong performance of the US economy.
Relevant DXY US Dollar Index Levels
At time of writing, the DXY index is down 0.13% on the day, trading at 99.49. A break above 99.76 (April 6 high), would open the door to 100.00 (psychological level) and 100.55 (May 14, 2020 high). On the other hand, the next support appears at 97.68 (March 30 low), followed by 97.38 (55-day SMA) and 96.77 (100-day SMA).
Source: Fx Street
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