US dollar index rises above 92.00

• DXY rises further and breaks through the 92.00 level.
• US 10-year yields trade closer to the 1.75% level.
• The Fed said it will not extend the SLR pause.

The US Dollar Index (DXY), which measures the dollar against a set of its major G10 peers, is gaining additional strength and hit new weekly highs above the 92.00 hurdle.

The US Dollar Index now looks like 92.50

The dollar gains more bullish momentum after the Federal Reserve announced that it will not extend the supplemental leverage ratio (SLR).

Under this rule, banks could exclude Treasury bonds and deposits in Fed banks when it comes to calculating the leverage ratio. It is worth remembering that this rule came into effect almost a year ago with the onset of the pandemic.

The move puts additional pressure on the bond market and leads to higher yields. In fact, the yield on 10-year notes operates close to the 1.75% level, levels last recorded in January 2020.

What to look for around USD

The change in attitude of the dollar observed in recent weeks continues to be supported by the expected better performance of the US economy against its G10 peers. The new stimulus aid is also seen to add to the latter with investors’ perception of higher inflation in the coming months and its translation into higher US yields. However, a sustainable move up the DXY should be taken with a pinch of salt amid the Fed’s mega-accommodative stance (until “further substantial progress” is made in inflation and employment) and hopes of a strong global economic recovery.

Technical levels

At the moment, the index is gaining 0.29% to 92.13 and a breakout of 92.50 (March 9, 2021 high) would expose 92.68 (200-day SMA) and finally 94.30 (November 4, monthly high). On the other hand, the next support is located at 91.30 (weekly low on March 18), followed by 91.05 (high on February 17) and then 90.86 (50-day SMA).