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  • DXY briefly tested weekly lows in the sub-90.00 area.
  • Chief Powell reiterated the ultra-dovish stance from the Fed.
  • Advanced Q4 GDP figures, weekly Claims next in the docket.

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main rivals, remains under heavy pressure around the key 90.00 neighbourhood in the second half of the week.

US Dollar Index looks to data, yields

The index loses momentum following two daily builds in a row and keeps the narrow trading range always around the psychological 90.00 neighbourhood.

The dollar, in the meantime, remains under pressure, particularly after Chief Powell reiterated once again that the Federal Reserve will keep its monetary conditions unchanged for the foreseeable future, as per his recent testimonies in Capitol Hill.

In addition, the index appears decoupled from the price action in US yields, with the 10-year benchmark climbing to levels last seen in February 2020 beyond the 1.40% area.

In the US calendar, another revision of the Q4 GDP is due seconded Durable Goods Orders and by usual weekly Initial Claims.

What to look for around USD

The index flirts with the key 90.00 support, as the selling bias around the dollar has accelerated as of late. In the meantime, bullish attempts in the buck should remain short-lived amidst the broad-based fragile outlook for the currency in the medium/longer-term. The latter is propped up by the reinforced mega-accommodative stance from the Fed until “substantial further progress” is seen, persistent chatter of extra fiscal stimulus and prospects of a strong recovery in the global economy, which are all seen underpinning the better sentiment in the risk complex.

Key events in the US this week: Second revision of Q4 GDP and Initial Claims come in on Thursday, while inflation figures gauged by the PCE and the final Consumer Sentiment measure are due on Friday.

Eminent issues on the back boiler: 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 0.28% at 89.92 and faces the next support at 89.20 (2021 low Jan.6) followed by 88.94 (monthly low March 2018) and finally 88.25 (2018 low Feb.16). On the flip side, a breakout of 91.05 (weekly high Feb.17) would open the door to 91.35 (100-day SMA) and finally 91.60 (2021 high Feb.5).

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