- The DXY index continues to advance and hits new yearly highs near 92.60.
- The DXY index challenges the 200-day SMA near 92.50.
- Powell’s testimony, preliminary PMIs and durable goods orders are high on the US economic calendar.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, extends bullish momentum to 92.60 region on new yearly highs during the European session on Wednesday.
US Dollar DXY Index Flirts With 200-Day Simple Moving Average
The DXY index extends Tuesday’s advance and records new highs in the levels last viewed end of November 2020 around 92.60.
In fact, the recovery of US yields in combination with the reactivation of the reflation trade and pessimism about the vaccination campaign in Europe continues to give wings to the US dollar and maintains risk appetite under persistent downward pressure.
Still in the US bond market, yields on the key 10-year bond manage to rebound from weekly lows at levels below 1.60% and regain the 1.62% level so far.
During the American session, President Powell will testify one more time, this time before the Banking, Housing and Urban Affairs Committee. In addition, MBA weekly mortgage applications will be released along with durable goods orders data for the month of February, preliminary PMIs for March and the weekly report on US crude oil inventories from the EIA.
What can we expect around the USD?
The DXY US Dollar Index is extending the breakout of the 92.00 level to the upside and reaching new highs around the 92.60 region, which is the area that coincides with the 200-day SMA. The recently approved fiscal stimulus package adds to the current superior performance of the US economy, as well as investors’ perception of higher inflation in the coming months, all transforming into additional strength for the dollar. However, the Fed’s mega-accommodative stance (until “further substantial progress” in inflation and employment is made) and hopes for a strong global economic recovery remain an ever-present source of support for the appetite for oil. risk, which could limit the dollar’s upward momentum.
Key events in the US this week: President Powell’s Senate Testimony, Markit Preliminary PMI, Durable Goods Orders (Wednesday) – Final Fourth Quarter GDP, Initial Unemployment Claims (Thursday) – February PCE, Personal Income / Spending, Final Consumer Sentiment Index 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 0.17% on the day, trading at 92.49. A breakout of 92.60 (March 24 high), would expose 92.61 (200-day SMA) and 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 then 90.98 (50-day SMA).
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