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  • DXY adds to Friday’s gains and advances to the 92.30 area.
  • Fed’s Powell said the US economy is at an “inflection point”.
  • US 10-year yields ease a tad to the 1.65% zone.

The greenback, when tracked by the US Dollar Index (DXY), adds to gains recorded at the end of last week around the 92.30/35 band.

US Dollar Index looks to yields, data

The index starts the week on a positive note and looks to put further distance from last week’s lows in the 92.00 neighbourhood.

The better tone in the dollar comes despite a knee-jerk in US yields, with the key 10-year note hovering around the 1.65% and coming under some pressure after earlier peaks near 1.68%.

Collaborating with the bid bias in the buck, Chairman Powell said in an interview published on Sunday that the US economy is at an “inflection point”, while the door stays open to further improvement in growth and job creation. Powell justified the better growth prospects on both monetary and fiscal support as well as the solid vaccine rollout.

There are no relevant data releases in the US data sphere at the beginning of the week, although the focus of attention is expected to be on Tuesday’s release of inflation figures tracked by the CPI and further key results later in the week.

What to look for around USD

The dollar has been losing momentum since YTD highs near 93.50 recorded in late March, although sellers have so far failed to drag the index further south of the 92.00 neighbourhood. DXY now looks under downside pressure, as investors seem to have already priced in the US reflation/vaccine trade. 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.

Key events in the US this week: March Inflation figures (Tuesday) – Chairman Powell speech, Fed’s Beige Book (Wednesday) – Retail Sales, Initial Claims, Philly Fed Index, Industrial Production (Thursday) – Housing Starts, Building Permits, advanced Consumer Sentiment (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 gaining 0.14% at 92.31 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 91.55(50-day SMA) and then 91.30 (weekly low Mar.18).

 

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