- DXY advances further and trades near the 92.00 level.
- US yields pushes further north of the 1.60% yardstick.
- The FOMC meeting will be the salient event later in the session.
The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main competitors, remains on the positive path so far this week and approaches the 92.00 neighbourhood on Wednesday.
US Dollar Index stronger on yields, looks to data
The index advances for the fourth consecutive session on Wednesday and trades at shouting distance from the key 92.00 level on the back of the persistent firm note in US yields.
Indeed, yields of the key US 10-year note extend the move past the 1.60% mark, always on the back of the US economic performance narrative, the vaccine rollout and the investors’ perception of higher inflation in the next months.
In the US docket, market participants will close watch any mention by Chairman Powell of the recent developments around yields and inflation at the FOMC gathering due later in the NA session. Other than the Fed, weekly Mortgage Applications by MBA are due seconded by Building Permits, Housing Starts and the EIA’s report on crude oil supplies.
What to look for around USD
The change of heart in the buck seen in past weeks remains underpinned by the expected better performance of the US economy vs. its G10 peers. The fresh stimulus aid is also seen adding to the latter pari passu with the investors’ perception of higher inflation in the months to come and its translation into rising US yields. However, a sustainable move higher in DXY should be taken with a pinch of salt amidst the mega-accommodative stance from the Fed (until “substantial further progress” in inflation and employment is made) and hopes of a strong global economic recovery.
Key events in the US this week: FOMC event (Wednesday) – Initial Claims/Philly Fed Index (Thursday).
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 0.08% at 91.93 and a breakout of 92.50 (2021 high Mar.9) would expose 92.73 (200-day SMA) and finally 94.30 (monthly high Nov.4). On the other hand, the next support emerges at 91.36 (weekly low Mar.11) seconded by 91.05 (high Feb.17) and then 90.80 (50-day SMA).
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