US Dollar Index recedes from tops near 93.00 ahead of data

• DXY gives away part of the recent strong advance.
• US 10-year yields resume the upside to the 1.65% area.
• Inflation tracked by the PCE takes centre stage later in the session.

The greenback, when measured by the US Dollar Index (DXY), now trades slightly on the defensive around the 92.80/70 band at the end of the week.

US Dollar Index looks to yields, data

The index struggles to push higher on Friday following three consecutive daily advances, with the key barrier at 93.00 the figure emerging as the next target of note in the near-term.

The rebound in US yields in combination with the US economic outperformance narrative continue to underpin the solid momentum in the greenback. This view is also emphasized by the opposite situation in the Old Continent, where the poor vaccine rollout and speculations of another wave of coronavirus contagion have taken a toll on growth prospects.

On the US data space, inflation figures tracked by the PCE will be in the limelight later in the NA session seconded by Personal Income/Spending, Trade Balance results and the final gauge of the Consumer Sentiment for the month of March.

What to look for around USD

The upside momentum in the greenback looks well and sound and approaches the 93.00 neighbourhood. Supporting this idea, the recent breakout of the 200-day SMA seems to bolster the now constructive view on the buck. 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 dollar. 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: 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 losing 0.06% at 92.75 and faces the next support at 91.30 (weekly low Mar.18) seconded by 91.07 (50-day SMA) and then 91.05 (high Feb.17). On the other hand, a breakout of 92.91 (2021 high Mar.25) would expose 93.00 (round level) and finally 94.30 (monthly high Nov.4).