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  • DXY moves to fresh 2021 highs near 93.50, deflates afterwards.
  • President Biden will speak later today on extra stimulus.
  • The ADP report takes centre stage in the US calendar.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, now alternate gains with losses after recording fresh 2021 highs in the 93.40/45 band during early trade.

US Dollar Index focused on yields, Biden, data

The index appears to have met a decent resistance in the vicinity of 93.50 on Wednesday, coincident with slightly overbought conditions as per the daily RSI.

The ongoing knee-jerk in DXY comes along a corrective downside in yields of the US 10-year benchmark from recent multi-month peaks around 1.77% amidst month/quarter-end flows.

Later in the session, investors will closely follow the speech by President Biden in Pittsburgh, where he is expected to unveil plans of extra stimulus involving infrastructure, manufacturing and health care. This planned package would worth around $3 trillion.

In the data space, the ADP report for the month of March will be in the limelight seconded by weekly Mortgage Applications, the Chicago PMI, Pending Home Sales and the usual weekly report on US crude oil supplies by the EIA.

In the Fedspeak universe, Atlanta Fed R.Bostic (voter, centrist) will be the sole speaker later on Wednesday.

What to look for around USD

The upside momentum in the dollar looks well and sound and the index continues to consolidate the recent breakout of the 93.00 barrier, or new YTD tops. 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: ADP Report, President Biden’s speech (Wednesday) – Initial Claims, ISM Manufacturing (Thursday) – Nonfarm Payrolls (Friday).

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 losing 0.10% at 93.20 and faces the next support at 92.50 (200-day SMA) followed by 91.30 (weekly low Mar.18) and then 91.22 (50-day SMA). On the upside, a break above 93.43 (2021 high Mar.31) would expose 94.00 (round level) and finally 94.30 (monthly high Nov.4).