US Dollar Index gains traction around the 90.00 level
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US Dollar Index gains traction around the 90.00 level

  • DXY alternates gains with losses around the 90.00 region.
  • Investors’ focus remains on US yields, politics.
  • US CPI, Fedspeak, Beige Book next on tap in the calendar.

The dollar, when tracked by the US Dollar Index (DXY), looks to leave behind Tuesday’s pullback and keeps gyrating around the 90.00 area on Wednesday.

US Dollar Index looks to data, yields

The index looks to resume the recent upside following Tuesday’s negative price action and after being rejected from so far yearly tops around 90.70 recorded on Monday.

Higher yields in the US 10-year benchmark has been sustaining the recovery in the dollar along with rising concerns over the pick-up in coronavirus cases around the world despite the vaccine rollout. In additon, effervescence in the US political scenario appears to be gaining traction as President elect Biden gets closer to swear as the next US President (January 20th). 

In the US docket, December’s inflation figures will take centre stage later in the NA session seconded by the EIA’s weekly report on crude oil inventories and the Fed’s Beige Book.

In addition, St. Louis Fed J.Bullard (2022 voter, dovish), FOMC’s L.Brainard (permanent voter, dovish), Philly Fed P.Harker (2023 voter, hawkish) and FOMC’s R.Clarida (permanent voter, dovish) are all due to speak throughout the session.

What to look for around USD

The index regained buying interest after bottoming out in the 89.20 area in the first trading week of the new year and managed to advance to the proximity of 90.70 so far this week, where some relevant resistance turned up. The recovery in US yields keeps lending support to the greenback as investors continue to perceive a potential pick-up in inflation pressure/expectations in response to the most likely increment in fiscal stimulus under a Democrat White House. However, the outlook for the greenback remains fragile in the short/medium-term for the time being amidst 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 gaining 0.08% at 90.15 and a breakout of 90.72 (2021 high Jan.11) would open the door to 91.01 (weekly high Dec.21) and finally 91.23 (weekly high Dec.7). On the other hand, immediate contention is located at 89.20 (2021 low Jan.6) followed by 88.94 (monthly low March 2018) and the 88.25 (monthly low February 2018).

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