US Dollar Index regains composure near 89.60 ahead of key data

• The index adds to Wednesday’s gains in the 89.60 region.
• Investors’ attention remains on recent developments in Washington.
• Claims, ISM Non-Manufacturing, Fedspeak next of relevance in the docket.

The greenback, when tracked by the US Dollar Index (DXY), appears to have regained some composure and advances to fresh daily highs in the 89.60 region.

US Dollar Index looks to politics, yields, data

The index so far advances for the second session in a row on Thursday on the back of the resumption of some risk aversion mood and the recent recovery in yields of the key US 10-year benchmark to levels above the key 1.0% mark.

In fact, US yields extend the surpass to levels last seen in late March 2020 above the 1.0% mark, collaborating further with the change of mood around the buck.

Nothing really new from the FOMC Minutes released on Wednesday, where the Committee still sees the economy losing traction in the next months despite the boost of optimism from the vaccine rollout.

A very interesting session data wise in the US, with the usual Initial Claims due in first turn seconded by the ISM Non-Manufacturing and speeches by Philly Fed P.Harker (2023 voter, hawkish), St. Louis Fed J.Bullard (2022 voter, dovish) and Chicago Fed C.Evans (voter, centrist).

What to look for around USD

The index regains some buying interest and manages to leave behind recent lows in the 89.20 region, mainly on the back of the recovery of US 10 yields while the risk complex seems to be taking a breather. However, the outlook for the greenback remains immersed into the bearish side for the time being amidst massive monetary/fiscal stimulus in the US economy, the “lower for longer” stance from the Federal Reserve and prospects of a strong recovery in the global economy.

US Dollar Index relevant levels

At the moment, the index is gaining 0.10 at 89.61 and a breakout of 91.01 (weekly high Dec.21) would aim for 91.23 (weekly high Dec.7) and finally 91.92 (23.6% Fibo of the 2017-2018 drop). On the other hand, the next support is located at 89.20 (2021 low Jan.6) followed by 88.94 (monthly low March 2018) and the 88.25 (monthly low February 2018).