- The DXY advances further north of the 91.00 mark.
- US Retail Sales came in above consensus in January.
- The FOMC Minutes are due later in the session.
The buying pressure around the greenback accelerates further and lifts the US Dollar Index (DXY) to new highs above the 91.00 barrier.
US Dollar Index in multi-day tops
The index navigates the area of multi-day highs past the 91.00 mark for the first time since February 8, adding to Tuesday’s gains and extending further the bounce off the 90.30/40 band, where sits the 2020-2021 support line.
The strong rebound in the dollar comes in tandem with the persistent recovery in yields of the key US 10-year note, which navigate the upper end of the recent range above 1.30% for the first time since February 2020.
Positive results in the US docket also lenb a hand to the buck after headline Retail Sales expanded 5.3% MoM in January, while core Sales also expanded above forecasts 5.9%.
Further US data saw the Industrial Production expanding 0.9% inter-month, also in the first month of the year, Capacity Utilization up to 75.6% and Manufacturing Production growing 1.0% from a month earlier.
Later in the session comes in the Business Inventories, the NAHB Index, the FOMC Minutes and the weekly report by the API will close the daily calendar.
What to look for around USD
The corrective downside in the index appears to have met a decent support near the 90.30/20 band recently. The price action in the dollar recovered the positive correlation to US yields, allowing the ongoing rebound to the vicinity of the 91.00 yardstick. However, bullish attempts in the buck should remain short-lived, amidst the broad fragile outlook for the currency in the medium/longer-term. In the meantime, the current massive monetary/fiscal stimulus in the US economy, the “lower for longer” stance from the Fed and prospects of a strong recovery in the global economy are forecast to keep underpinning the better sentiment in the risk-associated space.
Key events in the US this week: FOMC Minutes (Wednesday). Weekly Initial Claims and the Philly Fed Index are due on Thursday ahead of flash PMIs (Friday).
Eminent issues on the back boiler: US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. US real interest rates vs. Europe. Could US fiscal stimulus lead to overheating? Future of the Republican party post-Trump acquittal.
US Dollar Index relevant levels
At the moment, the index is gaining 0.50% at 90.97 and a breakout of 91.03 (weekly high Feb.17) would open the door to 91.55 (100-day SMA) and finally 91.60 (2021 high Feb.5). On the other hand, initial support lines up at 90.22 (weekly low Feb.16) followed by 90.04 (weekly low Jan.21) and then 89.20 (2021 low Jan.6).
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