US dollar index DXY retreats from highs near 90.40 before US CPI.

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  • The DXY index returns initial gains to the 90.40 region.
  • US 10-year yields are also down about 1.61%.
  • US inflation figures measured by the CPI stand out on today’s economic calendar.

The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, has halted its movement around the 90.40 region and seen a corrective drop to the 90.25 / 20 zone during the European session on Wednesday.

The US Dollar DXY Index focuses attention on inflation data

The DXY index extends the erratic move so far this week, although it seems to be well supported above the 90.00 level for the moment. In fact, despite the prevailing bearish tone around the dollar, sellers remain unable to convincingly break below the mentioned level.

the rise of volatility in stock markets (based on the recent rise in the VIX, also known as the “Wall Street Fear Index”), market discussions regarding higher inflation in the coming months and a corrective rise in US yields. They have helped prevent the DXY Index from falling below the round 90.00 level in recent hours.

Regarding US data, inflation figures for the month of April, measured by the CPI, will focus investors’ attention at the start of the American session on Wednesday. In addition, the MBA’s weekly mortgage applications and the EIA report on US crude oil inventories will also be publicized.

On the Fed, moderate member and permanent voter R. Clarida will speak later on Wednesday, followed by speeches by R. Bostic and P. Harker.

On Tuesday, FOMC Governor L. Brainard pointed out the need for patience to achieve the Fed’s goals amid prevailing risks. Both she and R. Bostic reiterated that the higher price episodes should be considered temporary and defended the continuation of the Fed’s accommodative stance.

What can we expect around the USD?

The DXY Index extends the choppy price action so far this week, while the 90.00 zone still appears as a tough nut to crack for USD sellers. Recent bouts of risk aversion have lent some much-needed oxygen to the dollar, although the negative stance on the currency appears to dominate the larger picture for now. This view has been exacerbated after the April NFP, adding at the same time to sentiment around the impending full reopening of the US economy, the relentless strength of national fundamentals, the strong launch of the vaccination campaign and the resurgence of market rumors regarding an earlier-than-expected adjustment in bond buying by the Fed. The latter occurs despite the Fed’s efforts to lower this scenario, at least for the next few months.

Key events in the US this week: April CPI, Core CPI (Wednesday) – Initial Jobless Claims (Thursday) – Retail Sales, Industrial Production, Consumer Sentiment for May (Friday).

Eminent Background Issues: Biden’s bill to boost nearly $ 4 trillion worth of infrastructure. 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 0.05% on the day, trading at 90.21. A breakout of 91.06 (100-day SMA) would open the door at 91.43 (May 5 high) and at 91.70 (50-day SMA). On the other hand, immediate support is at 89.98 (May 11 low), followed by 89.68 (February 25 low) and 89.20 (January 6 low).

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