- The DXY index regains traction above 92.00 after Tuesday’s pullback.
- US yields are recovering from recent lows and are targeting 1.60%.
- The inflation figures measured by the CPI will be the most prominent event of the day.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, partially reverses the previous day’s retracement and regains some traction to the upside, always above the 92.00 level at the start of the European session on Wednesday.
US Dollar Index focuses attention on data and returns
The DXY Index Moves Into Positive Territory Again, Slashing Some Of Tuesday’s Losses thanks to the recovery of US yields.
In fact, 10-year US Treasury yields have now entered a consolidation phase. above 1.50%, after setting highs above the 1.60% level in previous sessions. In the meantime, investors will focus their attention on the next release of inflation figures for the month of February, which will be released at the start of today’s American session.
In the broadest perspective, the narrative of superior US performance continues to support the dollarAll underpinned by the solid faster vaccination pace and prospects for increased US fiscal stimulus.
Additional data from the US will show MBA’s weekly mortgage applications, the EIA report on crude oil inventories, as well as a 10-year bond auction.
What can we expect around the USD?
General sentiment around the dollar remains strong and pushed the DXY index to fresh yearly highs above the 92.00 level earlier in the week. The recent change in attitude in the dollar came along with the strong rebound in US yields to levels recorded more than a year ago, all in the context of the growing perception of investors of higher inflation in the coming months. However, a sustainable upward move in the DXY index should be taken with a pinch of salt amid the Fed’s mega-accommodative stance (until “substantial progress” is seen), additional fiscal stimulus, and hopes for a strong economic recovery abroad.
Key events this week in the US: Inflation figures measured by the CPI (Wednesday), initial jobless claims (Thursday), consumer sentiment for February (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 0.28% on the day, trading at 92.21. A breakout of 92.50 (March 9 high), would expose 92.85 (200-day SMA) and finally 94.30 (November 4 high). On the other hand, the next support is at 91.19 (100-day SMA), followed by 91.05 (February 17 high) and 90.61 (50-day SMA).
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