US Dollar Index approaches 91.00 ahead of key data

• The index picks up extra pace and reclaims the 90.80/90 region.
• The sour sentiment prevails in the risk complex so far.
• US flash Q4 GDP, weekly Claims, trade balance next on tap.

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main rivals, adds to recent gains and approaches the key 91.00 yardstick.

US Dollar Index looks to risk trends, data

The index advances for the second session in a row and slowly creeps towards the key barrier at 91.00 the figure on Thursday.

The selling bias in the risk-associated universe continues to sustain the recovery in the demand for the buck in spite of the continuous decline in yields of the key US 10-year benchmark, which have slipped back to the 1.00% neighbourhood.

The dollar remained apathetic after the Fed kept its monetary policy stance unchanged at its Wednesday’s event and Chief Powell reiterated once again that any form of tapering or modification of its current policy is quite far away for the time being.

Also helping the extra demand for the buck was the sharp pick up in the VIX index (aka “the panic index”) on Wednesday, climbing to levels last seen in November 2020 above the 37.0 level.

Later in the US data space, advanced Q4 GDP figures will take centre stage followed by the usual weekly Claims, advanced Trade Balance figures and December’s New Home Sales.

What to look for around USD

DXY extends the upside to the vicinity of the 91.00 level amidst alternating risk appetite trends. Occasional bullish attempts in the dollar, however, are expected to be short-lived amidst the fragile outlook for the greenback in the medium/longer-term, and always amidst the massive monetary/fiscal stimulus in the US economy, the “lower for longer” stance from the Federal Reserve and prospects of a strong recovery in the global economy.

US Dollar Index relevant levels

At the moment, the index is advancing 0.16% at 90.78 and a breakout of 91.01 (weekly high Dec.21) would open the door to 91.96 (100-day SMA) and finally 92.46 (23.6% Fibo of the 2020-2021 drop). On the flip side, initial support aligns at 90.21 (21-day SMA) followed by 89.20 (2021 low Jan.6) and finally 88.94 (monthly low March 2018).