US dollar DXY index struggles to find direction around 90.00 level

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  • The DXY index is moving within a narrow range around the 90.00 level.
  • US markets are closed for the Memorial Day holiday.
  • NFP US Nonfarm Payrolls will be the focus of investors later in the week.

The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, moves without a clear direction around the region of 90.00 at the start of the European session on Monday.

US Dollar DXY Index remains capped at 90.50

The DXY index oscillates between slight gains and minor losses around the 90.00 area on Monday. amid low volatility and a reduction in trading conditions in global markets due to the Memorial Day holiday in the US.

Meanwhile, the DXY index seems on the defensive after being rejected from last week’s highs near the 90.50 region amid a downward correction in 10-year US yields and alternating trends in risk appetite.

Turning to economic data this week, investors will be closely monitoring the May Non-Farm Payroll NFP release on Friday and the ISM Manufacturing PMI on Tuesday as the key drivers of sentiment around to the US dollar in the very short term.

What can we expect around the USD?

The DXY index remains under pressure near the 90.00 level and after retracing the recent bullish attempt to the 90.50 region in recent days. Looking at the bigger picture, the negative stance on the dollar appears to prevail among market participants as speculation of higher inflation in the medium term now appears to have lost momentum and the narrative of superior US economic performance appears be almost discounted in price. Driving bearish sentiment on the dollar is also further confirmation of the Fed’s mega-accommodative stance for the foreseeable future, based on recent FOMC minutes and Fed speeches.

Key events in the US this week: ISM Manufacturing PMI, Markit Final Manufacturing PMI (Monday) – Fed Beige Book (Wednesday) – ADP Report, Initial Jobless Claims, ISM Non-Manufacturing PMI (Thursday) – NFP Non-Farm Payrolls, Factory Orders (Friday ).

Eminent Background Issues: Biden’s bill to boost infrastructure worth nearly $ 6 trillion. 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?

Relevant levels of the US dollar DXY index

At the time of writing, the DXY index is shedding 0.02% on the day, trading at 90.03. The next support is at 89.53 (May 25 low), followed by 89.20 (Jan 6 low) and 88.94 (March 2018 low). On the upside, a breakout of 90.90 (May 13 high) would open the door to 91.07 (100-day SMA) and finally 91.43 (May 5 high).

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