- The sales tone remains around the dollar.
- The NFIB index fell slightly to 95 points in January.
- Kaplan, governor of the Atlanta Fed, does not rule out a rebound in inflation.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, remains defensive in the region of 90.60 / 50 on Tuesday.
US dollar DXY index recedes on risk appetite
The DXY index loses ground for the third day in a row on Tuesday after being rejected from annual highs in the 91.60 region at the end of last week.
Investor preference for riskier assets has accelerated lately in response to reflation trading, and has seen bolstered by hopes for a firm economic recovery. Meanwhile, the launch of the vaccine is expected to accelerate in Europe, adding to strong growth prospects.
At the beginning of the session, Kaplan, governor of the Atlanta Fed, has said a temporary spike in inflation would not be surprising., as he sees a strong boost to GDP this year and expects the economy to expand above trend in 2022. Kaplan also favored dropping some of the current extraordinary measures once the pandemic has passed. He also believes that there are no systemic risks.
Regarding US data, the NFIB index stood at 95 points for the month of January (from December 95.9). JOLTs job openings, St. Louis Fed Governor J. Bullard’s speech, and API’s regular weekly report on US crude oil supplies will be released during the American session. .
What can we expect around the USD?
The dollar’s rise lost steam at the 91.60 area last 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. However, it is expected that the continuation of the uptrend of the dollar will remain somewhat contained 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 economy of The US, 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: Inflation Figures Measured By CPI / Core CPI, President Powell’s Address On “The State Of The US Labor Market” on Wednesday and 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. Reduction of speculation in the face of economic recovery. Real US interest rates versus Europe.
Relevant levels of the US dollar DXY index
At the time of writing, the DXY index is down 0.36% on the day, trading at 90.60. Initial support is at 90.50 (Feb 9 low), followed by 90.04 (Jan 21 low) and 89.20 (Jan 6 low). On the upside, a breakout of 91.60 (Feb 5 high), would open the door to 91.78 (100-day SMA) and finally 92.46 (23.6% Fibonacci retracement of the 2020-2021 dip).
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