The DXY corrects lower after the 2021 highs near 93.50.
The ADP report surprised to the downside at 517,000 in March.
President Biden’s speech will be the highlight event later in the session.
The dollar holds inconclusive price action above 93.00 as tracked by the US Dollar Index (DXY) on Wednesday.
US dollar index declines from yearly highs near 93.50
The index found fairly decent resistance near 93.50 early in the session, levels last visited in November 2020 amid end-of-month flows, profit-taking sentiment, and a moderate bias towards risk-associated assets.
However, the dollar’s decline is expected to be only corrective, as US yields remain firm despite trading recent lows in the vicinity of the 1.80% level on Tuesday.
On the US agenda, the ADP report showed that the US private sector added 517,000 jobs in March, slightly below consensus, although markedly higher than the revised 176,000 in February. These results add to the already high optimism ahead of Friday’s non-farm payrolls release.
Later in the session, the Chicago PMI will be released followed by February pending home sales and the regular EIA report on US crude oil inventories.
What to look for around USD
The dollar’s bullish momentum looks good and solid, and the index continues to consolidate the recent breakout of the 93.00 barrier, or new year-to-date highs. Supporting this idea, the recent breakout of the 200-day SMA seems to reinforce the now constructive view on the dollar, at least in the short term. In addition, the recently approved fiscal stimulus package adds to the ongoing outperformance of the US economic narrative, as well as investors’ perception of higher inflation in the coming months, all transforming into additional oxygen for the dollar. However, the Fed’s mega-accommodative stance (until “further substantial progress” is made in inflation and employment) and hopes for a strong global economic recovery (now postponed to the end of the year) remain a source. supportive of the risk complex and have the potential to reduce the dollar’s bullish momentum in the long term.
Relevant levels
At the moment, the index is shedding 0.05% at 93.25 and faces the next support at 92.50 (200-day SMA) followed by 91.30 (weekly low March 18) and then 91.22 (50-day SMA). On the upside, a break above 93.43 (March 31, 2021 high) would expose 94.00 (round level) and finally 94.30 (November 4, monthly high).
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