- DXY attenuates the initial advance and returns to 91.10.
- The ADP beat estimates in January.
- US non-manufacturing ISM also surprised to the upside.
The US Dollar Index (DXY), which tracks the dollar against a group of its main competitors, falls back to the 90.15 / 10 band after hitting 2021 highs at 90.30.
The US Dollar Index Watching the Direction of Yields
The index halts three consecutive sessions with losses on Wednesday after posting new yearly highs around 90.30.
As is customary in recent sessions, the positive performance of US yields, particularly the 10-year benchmark, has been fueling the DXY bullish move. Rumors about the Fed’s phasing out (despite Powell and several FOMC members calling the idea premature), trade reflation, additional stimulus, and a faster economic recovery in the U.S. compared to their G10 peers have supported the current move in the dollar.
On the US economic agenda, ADP’s report hit 174,000 in January, beating expectations. Additional data showed the non-manufacturing ISM at 58.7, also above consensus.
What to look for around USD
DXY regained bullish traction and touched new yearly highs above 91.00 on Tuesday on the back of renewed offered bias in the risk-associated universe. However, the continuation of the dollar’s uptrend is forecast to remain somewhat contained amid the fragile outlook for the currency in the medium / long term, and always in the context of the current massive monetary / fiscal stimulus in the US economy. , the Fed’s “lower for longer” stance and the prospects for a strong recovery in the world economy.
Relevant levels
At the moment, the index is backing 0.07% to 91.12 and faces initial support at 90.42 (21-day SMA) followed by 89.20 (January 6 low) and finally 88.94 (March 2018 monthly low). On the upside, a breakout of 91.30 (Feb 3, 2021 high) would open the door to 91.87 (100-day SMA) and finally 92.46 (23.6% Fibonacci from the 2020-2021 dip).
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