- DXY gathers some upside traction near 89.50 on Wednesday.
- US 10-yer yields keep navigating below the 1.60% yardstick.
- MBA Mortgage Applications, EIA report, Fedpeak next on tap.
The US Dollar Index (DXY), which gauges the greenback vs. a basket of its main competitors, manages to reverse the recent leg lower to fresh monthly lows in the mid-89.00s.
US Dollar Index remains fragile and closer to YTD lows
The index so far reverses two consecutive daily pullbacks, including the drop to new monthly lows in the proximity of 89.50 recorded on Tuesday, and posts decent gains in the 89.70 zone following the opening bell in Euroland.
Lower US yields and some disappointing results from the US docket as of late put the dollar under further downside pressure, at the same time exacerbated by the improved sentiment surrounding the risk complex.
In the calendar, Mortgage Applications by MBA are due in the first turn seconded by the EIA’s weekly report on crude oil supplies. In addition, FOMC’s R.Quarles (permanent voter, centrist) will speak on the “Economic Outlook” later in the NA session.
What to look for around USD
The index remains under pressure in the area of monthly lows. Looking at the broader scenario, the negative stance on the dollar seems to prevail among market participants, as speculation of higher inflation in the medium-term now looks to have lost momentum and the US economic outperformance narrative seems almost fully priced in. Bolstering the bearish view on the buck emerges further confirmation of the Fed’s mega-accommodative stance for the foreseeable future, as per recent FOMC Minutes and Fed-speakers.
Key events in the US this week: Flash Q1 GDP, Initial Claims, Durable Goods Orders (Thursday) – Core PCE, Personal Income/Spending, final U-Mich Index (Friday).
Eminent issues on the back boiler: Biden’s plans to support infrastructure and families, worth nearly $4 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?
US Dollar Index relevant levels
Now, the index is gaining 0.05% at 89.71 and a breakout of 90.90 (weekly high May 11) would open the door to 91.07 (100-day SMA) and finally 91.43 (monthly high May 5). On the flip side, the next support is line up at 89.53 (monthly low May 25) followed by 89.20 (2021 low Jan.6) and then 88.94 (monthly low March 2018).
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