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  • DXY extends the sharp rebound further north of 91.00.
  • The dollar regains traction following the FOMC event.
  • Initial Claims, Philly Fed Index, Yellen next on tap.

The dollar keeps pushing higher and extends the recent breakout of the 91.00 yardstick when tracked by the US Dollar Index (DXY).

US Dollar Index bid post-Fed

The index is up for the third session in a row on Thursday and advances past the key 200-day SMA (91.51), all following Wednesday’s FOMC event.

In fact, the Fed brough forward any chances of starting the tapering talk at its meeting on Wednesday, while the “dots plot” now projects two interest rate hikes by end of 2023. Regarding inflation, the Fed sticks to the view that consumer prices will return to the target at some point in 2022.

In the wake of the Fed’s meeting, yields of the key US 10-year reference leapt to the vicinity of 1.60% from sub-1.50% levels, while the 5-year breakeven eased to 2.41%.

Later in the US docket, Treasury Secretary J.Yellen will testify before the House Ways and Means Committee on FY2022 budget. In the data space, weekly Claims are due seconded by the Philly Fed manufacturing gauge.

What to look for around USD

The index jumped beyond the 91.00 mark in the wake of the unexpected upbeat tone from the FOMC event on Wednesday. The likeliness that the tapering talk could kick in before anyone has anticipated and the views of higher rates by end of 2023 fuel the change of heart in the buck and the upside in DXY to levels last seen in mid-April. However, the still unchanged view on “transient” higher inflation and hence the continuation of the dovish stance by the Federal Reserve carries the potential to temper the current momentum in the dollar. A sustained break above the critical 200-day SMA should shift the dollar’s outlook to a more constructive one.

Key events in the US this week: Initial Claims, Philly Fed Index (Thursday).

Eminent issues on the back boiler: Biden’s plans to support infrastructure and families, worth nearly $6 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 0.26% at 91.63 and a breakout of 92.00 (round level) would open the door to 92.46 (23.6% Fibo level of the 2020-2021 drop) and finally 93.43 (2021 high Mar.21). On the flip side, the next contention aligns at 89.53 (monthly low May 25) followed by 89.20 (2021 low Jan.6) and then 88.94 (monthly low March 2018).