US dollar DXY index regains traction and rises to 90.60

• The DXY index reverses the recent bearish move and hits 90.60.
• The appetite for risk seems to be taking a breather.
• The preliminary indicator of US consumer sentiment will be released later in the day.

The US dollar DXY index, which measures the strength of the dollar against a basket of the main currencies, regains its smile at the end of the week and recovers to the region of 90.60.

US dollar DXY index focuses attention on data

The DXY index manages to gain some traction to the upside after five consecutive daily falls and manages to recover from the recent weekly lows in the region of 90.30 / 20. So far, the 2020-2021 line around the 90.30 level appears as an area of ​​solid support for the USD bears.

Meanwhile, investors appear to be reaping benefits from the recent appetite for risk, marking a pullback in equity markets and lending some temporary support to the US dollar. However, reflation trading and strong Global economic recovery, supported by launch of coronavirus vaccines, keep dollar sentiment under pressure.

During the American session, the release of the preliminary index of US consumer sentiment measured by the University of Michigan will be the highlight of the day, followed by a speech by the governor of the New York Fed, J. Williams.

What can we expect around the USD?

The negative corrective move in the dollar appears to have found decent support near 90.20 so far this week. Occasional bouts of strength in US yields remain the almost exclusive driver of dollar bullish attempts, helped by prospects for strong US growth versus other G-10 countries and the launch of vaccines. The continuation of the downtrend of the dollar seems the most likely scenario amid the fragile prospects for the currency in the medium / long term, and always in the context of the current massive fiscal and monetary stimulus in the US economy, the Federal Reserve’s “lower for longer” stance and the prospects for a strong recovery in the global economy, which is expected to turn into additional appetite for riskier assets.

Key events this week in the US: The preliminary indicator of consumer sentiment for the month of February 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?

Relevant levels of the US dollar DXY index

At the time of writing, the DXY index is gaining 0.24% on the day, trading at 90.63. A break above 91.60 (February 5 high), would open the door to 91.66 (100-day SMA) and finally 92.46 (23.6% Fibonacci retracement of the 2020-2021 dip). On the other hand, initial support is at 90.25 (February 10 low), followed by 90.04 (January 21 low) and 89.20 (January 6 low).