US dollar DXY index regains traction around 91.60

• The DXY index reverses Wednesday’s retracement and regains traction to the upside.
• The FOMC expects rates to remain low until at least 2023.
• Initial jobless claims, the Philadelphia Fed Manufacturing Index and the CB Leading Indicator Index all stand out on today’s economic calendar.

The US dollar DXY index, which measures the strength of the dollar against a basket of the main currencies, recovers positive terrain around 91.60 after the sharp setback the day before.

DXY US Dollar Index Moves Higher On Yields

The DXY index resumes rally after Fed-led pullback to 91.30 region and moves towards the 91.60 zone along with the highest yields in the US.

In fact, US 10-year bond yields have exceeded the 1.70% level on Thursday despite the FOMC reaffirming the mega-accommodative stance of monetary conditions and hinting at the idea that the current lows will remain unchanged at least until 2023.

Reinforcing the above, the president Powell reiterated that any talk of a gradual rate adjustment remains premature.while the Fed needs to see material progress towards its targets (relative to inflation and employment) rather than an improvement in forecasts.

Regarding the US data, today highlights the publication of the initial jobless claims, the Philadelphia Fed manufacturing index and the CB index of leading indicators.

What can we expect around the USD?

The change in attitude around the dollar observed in recent weeks continues to be supported by the expected better performance of the US economy compared to the other G-10 countries. The new stimulus aid is also seen to add to this latest positive momentum with investors’ perception of higher inflation in the coming months and its translation into higher US yields. 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 “further substantial progress” in inflation and employment is achieved) and the hopes for a strong global economic recovery.

Key events this week in the US: Initial Unemployment Claims / Philadelphia Fed Index (Thursday).

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 0.16% on the day, trading at 91.58. A breakout of 92.50 (March 9 high), would expose 92.70 (200-day SMA) and finally 94.30 (November 4 high). On the other hand, the next support is at 91.30 (March 18 low), followed by 91.05 (February 17 high) and 90.82 (50-day SMA).