- DXY is moving down to near 93.00.
- Initial US claims increased to 714,000 over the past week.
The US Dollar Index (DXY), which measures the dollar against a basket of its main rivals, remains on the defensive and closer to key support at 93.00.
US dollar index offered by falling yields
The index lost ground for the second day in a row on Thursday, reflecting the loss of bullish momentum in US yields. In fact, yields on the key US 10-year bond are deflating to below 1.70% after recent highs near 1.80%.
In addition, the better mood surrounding risk-related assets also weighs on the dollar, dragging the index lower.
In the US data space, initial claims unexpectedly jumped to 719,000 from a week earlier and Challenger job cuts dropped more than 86% in the year through March to 30,603.
The final reading of the Markit Manufacturing PMI index showed a rise in March to 59.1, implying an upward revision from the preliminary estimate of 59.0. The activity report in the manufacturing sector showed higher than expected figures in most of the indicators. The sector’s ISM index jumped to 64.7 in March, beating the market consensus of 61.3 and reaching the highest level since 1983. In February it had stood at 60.8.
The employment index went from 54.4 to 59.6; while that of new orders registered an increase from 64.8 to 68.0. Regarding prices, the indicator showed a drop from 86.0 to 85.6.
What to look for around USD
The bullish momentum in the dollar looks good and solid for now. 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. Additionally, 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 extra oxygen for the dollar. However, the Fed’s mega-accommodative stance (until “substantial progress” in inflation and employment is made) and hopes for a strong global economic recovery (now postponed to the end of the year) remain a source of support. for the risk complex and have the potential to reduce the bullish momentum of the dollar in the long term.
Technical levels
At the moment, the index is shedding 0.24% at 93.01 and faces the next support at 92.48 (200-day SMA) followed by 91.30 (weekly low March 18) and then 91.29 (50-day SMA). On the other hand, 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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