US Dollar Index drops to 5-week lows near 91.30

• DXY loses the grip and retreats to lows near 91.30.
• US 10-year yields look steady in the 1.55% region.
• The risk-on sentiment gathers further pace early on Monday.

The greenback, when tracked by the US Dollar Index (DXY), starts the week on the defensive and drops to multi-week lows near 91.30.

US Dollar Index weaker on steady yields, risk-on

The index adds to Friday’s losses and reaches new multi-week lows in the vicinity of 91.40 on the back of the consolidative mood in US yields and the extra improvement in the risk complex.

Indeed, yields of the US 10-year benchmark appear stabilized in the lower bound of the recent range around 1.55%.

Absent data releases or events in the US calendar at the beginning of week, investors should keep tracking US yields and developments in the risk-associated space for price action around the buck.

Despite latest results in US fundamentals confirmed the solid rebound in the economic activity, market participants keep looking to the progress of the vaccination rollout and the now better growth outlook on the other side of the ocean.

What to look for around USD

The dollar looks weaker in fresh lows around 91.40, always amidst the retracement in US yields and the loss of enthusiasm on the US reflation/vaccine trade. Also weighing on the buck emerges 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, all morphing into a source of support for the risk complex and a most likely driver of probable weakness in the dollar in the second half of the year.

Key events in the US this week: Initial Claims, CB Leading Index, Biden’s virtual Climate Summit (Thursday) – Flash Markit Manufacturing PMI (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 losing 0.31% at 91.33 and faces the next support at 91.30 (weekly low Mar.18)ahead of 91.03 (100-day SMA and then 89.68 (monthly low Feb.25). On the other hand, a break above 92.18 (200-day SMA) would open the door to 93.43 (2021 high Mar.31) and finally 94.30 (monthly high Nov.4).