- The DXY index reverses the recent weakness and is approaching the 92.00 level.
- US yields regain traction and are trading near 1.60%.
- The US producer price index and Michigan consumer sentiment are prominent on today’s economic calendar.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, smiles back on Friday and is approaching the 92.00 region.
DXY US Dollar Index Strengthens As Yields Rebound
The DXY index is moving firmly higher on Friday and breaks with three consecutive daily falls as a consequence of the rebound in US yields, with the 10-year bond once again approaching the key 1.60% zone.
The recovery of US yields occurs after disappointing US inflation figures for February chilled expectations of higher inflation in the coming months, which in turn will be sustained by the expected increase in fiscal spending. On this issue, the $ 1.9 trillion stimulus package became law after President Biden signed it on Thursday.
Regarding the US data, the February IPP producer price index and the preliminary index of consumer sentiment from the University of Michigan will be released today.
What can we expect around the USD?
Disappointing inflation figures released earlier in the week weighed on bullish sentiment around the dollar, prompting a corrective slide that found support near the 91.30 level for the time being. The change in attitude in the dollar observed in recent weeks came along with the strong rebound in US yields to levels recorded more than a year ago, all in the context of the growing perception of investors of higher inflation in the coming years. months. However, a sustainable upward move in the DXY index should be taken with a pinch of salt amid the Fed’s mega-accommodative stance (until “substantial progress” is seen), additional fiscal stimulus, and hopes for a strong economic recovery abroad.
Key events this week in the US: Producer prices for February and consumer sentiment from the University of Michigan (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 0.50% on the day, trading at 91.88. A breakout of 92.50 (March 9 high), would expose 92.80 (200-day SMA) and finally 94.30 (November 4 high). On the other hand, the next support is at 91.36 (March 11 low), followed by 91.05 (February 17 high) and 90.66 (50-day SMA).
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