- DXY gathers extra steam and reaches 3-day highs near 90.70.
- Higher US yields sustain the daily gains in the dollar.
- The February flash print of the Consumer Confidence comes up next.
The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main rivals, trades on an improved mood above 90.70, or 3-day highs, on Friday.
US Dollar Index stronger on yields
The index regains the smile following five consecutive sessions with losses and manages to bounce off weekly lows in the proximity of the 90.20 region.
In the meantime, the moderate spike in yields of the 10-year benchmark to levels past the 1.18% mark give fresh oxygen to the buck and pushes the index to new multi-day highs.
In addition, investors’ profit taking mood continues to hurt the risk complex and adds to the dollar’s daily recovery.
Later in the NA session, the preliminary gauge of the US Consumer Sentiment tracked by the U-Mich index will take centre stage along with the speech by New York Fed J.Williams (permanent voter, centrist).
What to look for around USD
The dollar’s corrective downside appears to have met a decent support near 90.20 so far this week. Bouts of occasional strength in US yields remain the almost exclusive driver of bullish attempts in the buck helped with firm growth prospects and auspicious (and fast) vaccine rollout vs. its G10 peers. The continuation of the downtrend in the dollar looks the most likely scenario against the backdrop of the fragile outlook for the currency in the medium/longer-term, and always amidst 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, which is expected to morph into extra appetite for riskier assets.
Key events this week in the US: Advanced measure of the Consumer Sentiment for the month of February (Friday).
Eminent issues on the back boiler: US-China trade conflict under the Biden’s administration. Trump’s impeachment. Tapering speculation vs. economic recovery. US real interest rates vs. Europe. Could US fiscal stimulus lead to overheating?
US Dollar Index relevant levels
At the moment, the index is gaining 0.32% at 90.70 and a breakout of 91.60 (2021 high Feb.5) would open the door to 91.66 (100-day SMA) and finally 92.46 (23.6% Fibo of the 2020-2021 drop). On the other hand, initial support is located at 90.25 (weekly low Feb.10) followed by 90.04 (weekly low Jan.21) and then 89.20 (2021 low Jan.6).
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