US Dollar Index loses momentum near 92.40
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US Dollar Index loses momentum near 92.40

  • DXY’s upside run out of steam in the 92.40 area.
  • US yields give away part of the earlier advance.
  • US Producer Prices rose 1.0% MoM, 4.2% YoY in March.

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main competitors, keeps the bid tone unchanged albeit below daily highs near 92.40.

US Dollar Index up on higher yields

The index managed to clinch daily peaks in the 92.40/45 band earlier in the session, although it gave away some pips soon afterwards.

However, the broad daily tone remains positive and always underpinned by the moderate rebound in US yields, particularly the 10-year reference. In fact yields of the 10-year note approached the 1.70% level after bottoming out near 1.60% just the previous session.

Looking at the broader picture, the dollar remains on the back footing so far this week after investors shifted their attention to the progress of the vaccination campaign in the Old Continent and the impact on the growth prospects.

Data wise in the US, March’s headline Producer Prices rose 1.0% MoM and 4.2% YoY, while Core prices gained 0.7% MoM and 3.1% YoY. Later on Friday, Wholesale Inventories for the month of February will close the calendar.

What to look for around USD

The upside momentum in the dollar faltered ahead of the 93.50 region in past sessions, sparking a corrective downside to the vicinity of the 92.00 region. The greenback now looks under some downside pressure, as the US reflation trade and the idea of higher inflation in the next months lost some vigour. Furthermore, 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 second half of the year.

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 gaining 0.24% at 92.28 and a break above 93.43 (2021 high Mar.31) would expose 94.00 (round level) and finally 94.30 (monthly high Nov.4). On the other hand, the next contention emerges at 91.99 (weekly low Apr.8) followed by 91.52(50-day SMA) and then 91.30 (weekly low Mar.18).

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