US Dollar Index resumes the upside above 92.00, looks to CPI

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  • DXY regains traction above 92.00 following Tuesday’s pullback.
  • US yields rebound from recent lows and target 1.60%.
  • Inflation figures tracked by the CPI will be the salient event.

The greenback partially reverses Tuesday’s pullback and regains some upside traction, always above the 92.00 mark when gauged by the US Dollar Index (DXY).

US Dollar Index looks to data, yields

The index trades back on the positive territory and trim part of Tuesday’s losses on the back of the recovery in US yields.

In fact, yields of the US 10-year Treasuries recover ground lost and approach the key barrier at 1.60%, as investors now look to the upcoming release of inflation figures for the month of February, due later in the NA session.

On the broader space, the US outperformance narrative continues to lend support to the buck, all sustained by the solid pace of the vaccine rollout and prospects of higher US fiscal stimulus.

Additional data will show the weekly Mortgage Applications by MBA, the EIA’s report on crude oil inventories as well as a 10-year Note Auction.

What to look for around USD

The overall sentiment in the dollar remains firm and pushed the index to new YTD highs in the mid-92.00s earlier in the week. The recent change of heart in the buck came in tandem with the strong bounce in US yields to levels recorded over a year ago, all against the backdrop of rising investors’ perception of higher inflation in the next months. However, a sustainable move higher in DXY should be taken with a pinch of salt amidst the mega-accommodative stance from the Fed (until “substantial further progress” is seen), extra fiscal stimulus and hopes of a strong economic recovery overseas.

Key events in the US this week: Inflation figures measured by the CPI (Wednesday) – Initial Claims (Thursday) – Flash February Consumer Sentiment (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 0.28% at 92.21 and a breakout of 92.50 (2021 high Mar.9) would expose 92.85 (200-day SMA) and finally 94.30 (monthly high Nov.4). On the other hand, the next support emerges at 91.19 (100-day SMA) seconded by 91.05 (high Feb.17) and then 90.61 (50-day SMA).

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