US Dollar Index pushes higher and tests 92.60, new 2021 highs

• DXY advances further and reaches fresh YTD peaks near 92.60.
• The index challenges the key 200-day SMA in the mid 92.00s.
• Powell’s testimony, flash PMIs, Durable Goods Orders next on tap.

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main rivals, extends the upside momentum to the 92.60 region, or new yearly tops, on Wednesday.

US Dollar Index flirts with the 200-day SMA

The index adds to Tuesday’s advance and records fresh peaks in levels last seen in late November 2020 around 92.60.

In fact, the recovery in US yields in combination with the reflation/vaccine trade continues to lend wings to the buck and keeps the risk-associated space under persistent downside pressure.

Still in the US bond market, yields of the key US 10-year note manage to bounce off weekly lows in sub-1.60% levels and regain the 1.62% yardstick so far.

Later in the US data space, Chairman Powell will testify once again, this time before the Committee on Banking, Housing and Urban Affairs. In addition, weekly Mortgage Applications by the MBA are due in first turn seconded by Durable Goods Orders for the month of February, March’s advanced PMIs and the weekly report on US crude oil inventories by the EIA.

What to look for around USD

The greenback manages well to extend further the breakout of the 92.00 mark and clinches new tops around 92.60, area coincident with the critical 200-day SMA. 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 remain an omnipresent source of support for the risk complex and carry the potential to contain the upside momentum in the dollar.

Key events in the US this week: Chairman Powell’s testimony before the Senate – Flash Markit’s PMIs, Durable Goods Orders (Wednesday) – Final Q4 GDP, Initial Claims (Thursday) – February’s PCE, Personal Income/Spending, final U-Mich Index (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 0.17% at 92.49 and a breakout of 92.60 (2021 high Mar.24) would expose 92.61 (200-day SMA) and finally 94.30 (monthly high Nov.4). On the other hand, the next support is located at 91.30 (weekly low Mar.18) seconded by 91.05 (high Feb.17) and then 90.98 (50-day SMA).