US Dollar DXY Index Remains Under Pressure Near 90.00 Ahead of Data

• The DXY Index briefly tests weekly lows below the 90.00 level.
• President Powell reiterated the Fed’s ultra-flexible stance.
• Fourth-quarter GDP figures, durable goods orders and US jobless claims stand out on today’s economic calendar.

The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, remains under heavy pressure near the key level of 90.00 in the second half of the week.

DXY US Dollar Index focuses attention on data and returns

The DXY index loses momentum after two consecutive days to the upside and remains within the recent narrow range around the psychological level of 90.00.

Meanwhile, the dollar remains under pressure, particularly after the Fed chairman, Jerome Powell, will reiterate once again that the Federal Reserve will keep its monetary conditions unchanged for the foreseeable future, according to their recent testimonies on Capitol Hill.

Also, the index DXY appears decoupled from price action from US yields., with the 10-year benchmark rising to levels last seen in February 2020 beyond the 1.40% area.

When it comes to US data, the fourth quarter GDP figures, durable goods orders and initial US jobless claims stand out on today’s economic calendar.

What can we expect around the USD?

The DXY index flirts with key support at 90.00, while the selling bias around the dollar has accelerated lately. Meanwhile, bullish attempts on the dollar should remain short-lived, amid the fragile overall outlook for the currency in the medium / long term. This is underpinned by the Fed’s (strengthened) accommodative stance, additional fiscal stimulus, and prospects for a strong recovery in the global economy, which are seen to underpin better confidence in risk appetite.

Key events this week in the US: Second quarter GDP revision and initial jobless claims (Thursday) and PCE inflation figures and final consumer sentiment reading (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. 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 down 0.28% on the day, trading at 89.92. The next support is at 89.20 (January 6 low), followed by 88.94 (March 2018 low) and 88.25 (February 16, 2018 low). On the other hand, a breakout of 91.05 (February 17 high) would open the door to 91.35 (100-day SMA) and finally 91.60 (February 5 high).