- The DXY index retraces the initial rise near 92.00.
- US 10-year yields remain close to 1.50%.
- Preliminary PMI, new home sales and Fed speeches will draw investors’ attention during the American session.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, returns to the 91.70 region after the failed attempt to test the 92.00 level early in the European session on Wednesday.
US Dollar DXY Index Now Turns Attention to Data
The DXY index returns part of the previous advance to the 91.90 region and is now holding on to slight gains after the rebound in risk appetite.
The dollar had a negative session on Tuesday after the Fed chairman, Jerome Powell, will reiterate once again that high inflation is seen as transitory, while stressing that any speech of a rate hike should be discarded. In line with Powell’s testimony, J. Williams of the New York Fed noted that the labor market still needs to improve a lot, while M. Daly of the San Francisco Fed suggested that the economy is still far from normalizing.
The lack of conviction in the USD to advance even further can be found in the stabilization of US bond yields to 10 years, while the 2-year yields returned some ground after the increase after the FOMC last week.
Turning to today’s US data, investor attention will focus on weekly MBA mortgage applications, preliminary Markit PMIs, new home sales data and the weekly supply report. of US crude oil by the EIA.
Also, R. Bostic of the Atlanta Fed and FOMC Governor M. Bowman have speeches scheduled.
What can we expect around the USD?
The DXY index remains under slight downward pressure so far this week due to improving risk appetite. The image that talks on easing stimulus could start earlier than anticipated and higher rate sentiments by the end of 2023 fuels the shift towards the dollar and the rise of the DXY index to levels last seen in mid-April. . However, the still unchanged view of higher “transitory” inflation, and thus the continuation of the pessimistic stance by the Federal Reserve, has the potential to moderate the current momentum of the dollar. A sustained break above the critical 200-day SMA should shift the dollar’s outlook to a more constructive one.
Key events in the US this week: New Home Sales, Preliminary Manufacturing PMI (Wednesday) – Q1 Final GDP, Durable Goods Orders, Initial Jobless Claims (Thursday) – Core PCE, June Final Consumer Sentiment (Friday).
Eminent Background Topics: 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 gaining 0.03% on the day, trading at 91.73. A breakout of 92.40 (June 18 high), would open the door to 92.46 (23.6% Fibonacci retracement of the 2020-2021 dip) and 93.43 (March 21 high). On the other hand, the next support is at 91.49 (200-day SMA), followed by 91.11 (100-day SMA) and finally 89.53 (May 25 low).
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