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  • DXY records fresh tops in the 90.40 region.
  • Core PCE rose 3.1% YoY in April, above estimates.
  • Final May U-Mich Index comes up next in the docket.

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main rivals, extends the rebound to the 90.40 area in the wake of key inflation data on Friday.

US Dollar Index bolstered by data

The index clinches fresh multi-day highs near 90.40 after US inflation figures gauged by the PCE (the Fed’s preferred measure) rose 3.6% on a year to April and 3.1% when comes to the Core PCE, the highest reading since 1994.

Additional data saw Personal Income contracting at a monthly 13.1% in April and Personal Spending expanding 0.5% from a month earlier. In addition, Goods Trade deficit narrowed to $85.23 billion and advanced Wholesale Inventories rose 0.8% inter-month.

Later in the session, the final May Consumer Sentiment and the Chicago PMI will close the weekly calendar ahead of President Biden’s FY2022 Budget.

What to look for around USD

The index remains under pressure despite regaining the 90.00 neighbourhood in past hours. Looking at the broader scenario, the negative stance on the dollar seems to prevail among market participants, as speculation of higher inflation in the medium-term now looks to have lost momentum and the US economic outperformance narrative seems almost fully priced in. Bolstering the bearish view on the buck emerges further confirmation of the Fed’s mega-accommodative stance for the foreseeable future, as per recent FOMC Minutes and Fed-speakers.

Key events in the US this week: President Biden’s budget announcement (Friday).

Eminent issues on the back boiler: Biden’s plans to support infrastructure and families, worth nearly $6 trillion. 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?

US Dollar Index relevant levels

Now, the index is gaining 0.39% at 90.35 and a breakout of 90.90 (weekly high May 11) would open the door to 91.08 (100-day SMA) and finally 91.43 (monthly high May 5). On the flip side, the next support is line up at 89.53 (monthly low May 25) followed by 89.20 (2021 low Jan.6) and then 88.94 (monthly low March 2018).