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  • DXY starts the week on the positive footing near 93.00.
  • US 10-year yields edge lower to sub-1.65% levels.
  • Dallas Fed Index, Fedspeak next on tap in the US docket.

The greenback, when tracked by the US Dollar Index (DXY), trades with decent gains and closer to the key barrier at 93.00 the figure on Monday.

US Dollar Index focused on yields, data

The index leaves behind Friday’s small downtick and resumes the upside with the initial target at the 93.00 neighbourhood, area last visited back in November 2020.

The current uptick in the dollar comes despite yields of the key US 10-year reference lose some upside momentum and trade in the lower bound of the daily range in the sub-1.65% zone.

In the meantime, inflows into the dollar remain well underpinned by the expected outperformance of the US economy vs. its G10 peers, at least in the first half of the year. This view is reinforced by the solid pace of the vaccine campaign in the US and extra fiscal spending, as per the recently approved new stimulus package worth $1.9 trillion.

In the US data sphere, the Dallas Fed manufacturing gauge is due later seconded by the speech by FOMC’s Governor C.Waller on “Federal Reserve Independence”.

What to look for around USD

The upside momentum in the dollar looks well and sound and the index already trade at shouting distance from the 93.00 yardstick. Supporting this idea, the recent breakout of the 200-day SMA seems to bolster the now constructive view on the buck, at least in the near-term. In addition, the recently approved fiscal stimulus package adds to the ongoing outperformance of the US economy narrative as well as the investors’ perception of higher inflation in the next months, all morphing into extra oxygen for the buck. However, 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 curtail the upside momentum in the dollar in the longer run.

Key events in the US this week: CB’s Consumer Confidence (Tuesday) – ADP Report, President Biden’s speech (Wednesday) – Initial Claims, ISM Manufacturing (Thursday) – Nonfarm Payrolls (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 gaining 0.02% at 92.77 and a breakout of 92.91 (2021 high Mar.25) would expose 93.00 (round level) and finally 94.30 (monthly high Nov.4). On the downside, the next support lines up at 91.30 (weekly low Mar.18) seconded by 91.11 (50-day SMA) and then 91.05 (high Feb.17).