- The DXY index loses momentum and falls back to the 90.40 area.
- The markets’ attention remains on Wednesday’s FOMC meeting.
- The focus is on today’s retail sales data.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, extends the small losses seen earlier in the week and now falls back to the 90.40 / 35 region during the European session on Tuesday.
US dollar index focuses attention on data and the FOMC
After Monday’s off session, DXY index moves lower on Tuesday amid steady US yields and rising cautious stance ahead of FOMC key event Wednesday.
On the latter, Fed is expected to stick to its pessimistic message on inflation and despite the latest higher-than-expected CPI, although the Committee could offer a more optimistic tone regarding the prospects for economic recovery and growth.
When it comes to today’s US economic data, May retail sales will be the featured post, followed by data from the PPI Producer Price Index, New York Empire State Regional Manufacturing Indicator, Industrial / Manufacturing Production, Business Inventories, NAHB Index, ICT Flows and Report API weekly on crude supplies.
What can we expect around the USD?
The DXY index survives so far above the 90.00 level, which has emerged as a stiff barrier for dollar bears. Higher inflation figures in May failed to ignite a serious bullish bid on the dollar, while also forcing yields back to multi-month lows well below 1.50%. The outlook for the currency remains on the downside and this view remains supported by the Fed’s persistent mega-accommodative stance (until “further substantial progress” in inflation and employment is made) for the foreseeable future. and growing optimism about a strong global economic recovery.
Key events in the US this week: Retail Sales, Producer Prices, Industrial Production (Tuesday) – Housing Starts, Building Permits, FOMC Event (Wednesday) – Initial Jobless Claims, Philadelphia Fed Index (Thursday).
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 shedding 0.15% on the day, trading at 90.36. 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 other hand, a breakout of 90.62 (June 4 high) would open the door to 90.90 (May 13 high) and finally 91.05 (100-day SMA).
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