- DXY extends the side-lined mood around the mid-90.00s.
- Investors’ focus remains on inflation, yields, tapering talk.
- The FOMC is largely expected to keep the dovish message on Wednesday.
The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main competitors, extends the consolidation mood around the 90.50 zone.
US Dollar Index focused on the Fed
The price action around the index stays choppy so far this week, always navigating the mid-90.00s amidst steady yields and rising cautiousness ahead of the key FOMC event later on Wednesday.
On the latter, while any move on rates is ruled out, investors will closely follow any hint at the timing of a modification of the bond purchase programme as well as the updated dots plot. Furthermore, the Committee is seen sticking to the “transient” story when comes to higher inflation, although it is forecast to deliver an upbeat assessment on the prospects for the economy.
In the docket, and other than the Fed meeting, we will see Housing Starts and Building Permits for the month of May followed by Export/Import Prices and the API’s report on crude oil supplies.
What to look for around USD
The index keeps the side-lined theme unchanged around 90.50 so far this week pari passu with the vigilant tone ahead of the FOMC event. Higher inflation figures in May failed to ignite a serious bullish attempt in the buck while they also forced yields to recede to multi-month lows well below 1.50%. The outlook for the currency still remains on the negative side and this view is supported by the perseverant mega-dovish stance from the Federal Reserve (until “substantial further progress” in inflation and employment is made) in place for the time being and rising optimism on a strong global economic recovery, which is seen underpinning the risk complex.
Key events in the US this week: Housing Starts, Building Permits, FOMC event (Wednesday) – Initial Claims, Philly Fed Index (Thursday).
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 losing 0.07% at 90.44 and faces the next contention at 89.53 (monthly low May 25) followed by 89.20 (2021 low Jan.6) and then 88.94 (monthly low March 2018). On the other hand, a breakout of 90.62 (weekly high Jun.4) would open the door to 90.90 (weekly high May 13) and finally 91.05 (100-day SMA).
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