US Dollar Index clings to gains around 91.70 ahead of data

• DXY is up smalls around 91.70 ahead of the European opening.
• Fed’s Powell said the economy is expanding quickly.
• Retail Sales, Initial Claims next of note in the calendar.

The greenback, in terms of the US Dollar Index (DXY), trades slightly on the positive territory around the 91.70 region ahead of the opening bell in the European markets on Thursday.

US Dollar Index now looks to data

The index so far reverses three consecutive daily pullbacks and manages to rebound from recent multi-week lows in the mid-91.00s.

The leg lower in the dollar comes amidst the steady performance in yields of the key US 10-year reference, which remain side-lined around the 1.63% region for the time being.

At his speech at the Economic Club of Washington DC, Chairman Powell reiterated the economy is entering a phase of quick expansion, adding that the Fed will consider hiking rates when the recovery in the labour market is “effectively complete” and inflation appear “on track to run moderately above two percent for same time”.

In the US data space, March’s Retail Sales will take centre stage along with the usual weekly Claims and seconded by the Philly Fed Index, the NY Empire State Index, Industrial Production, Capacity Utilization, Business Inventories, NAHB Index and TIC Flows.

In addition, Atlanta Fed R.Bostic (voter, centrist), San Francisco Fed M.Daly (voter, centrist) and Cleveland Fed L.Mester (2022 voter, hawkish) are all due to speak later in the NA session.

What to look for around USD

The dollar breached the 92.00 support and extended the leg lower to the 91.50 area so far. This view is supported by the retracement in US yields and the loss of enthusiasm on the US reflation/vaccine trade. Furthermore, 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 (now postponed to later in the year) remain a source of support for the risk complex and carry the potential to undermine further the dollar’s momentum in the second half of the year.

Key events in the US this week: Retail Sales, Initial Claims, Philly Fed Index, Industrial Production (Thursday) – Housing Starts, Building Permits, advanced Consumer Sentiment (Friday).

Eminent issues on the back boiler: Biden’s new stimulus bill worth around $3 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? Future of the Republican party post-Trump acquittal.

US Dollar Index relevant levels

At the moment, the index is gaining 0.05% at 91.67 and a break above 992.23 (200-day SMA) would aim for 93.43 (2021 high Mar.31) and finally 94.30 (monthly high Nov.4). On the downside, the next support is located at 91.56 (monthly low Apr.15) followed by 91.30 (weekly low Mar.18) and then 91.03 (100-day SMA).