- DXY struggles for direction in the sub-90.00 area.
- The dollar loses momentum following FOMC Minutes.
- Advanced Markit PMIs, Existing Home Sales next on tap.
The greenback alternates gains with losses and keeps the US Dollar Index (DXY) under pressure around the 89.80 region at the end of the week.
US Dollar Index risks extra pullbacks
The index looks to reverse the recent weakness, although still trading in levels below the 90.00 mark, as the global sentiment remains tilted towards the riskier assets and market participants have already fully digested the FOMC Minutes.
In addition, recent comments from Fed officials reaffirmed the patient stance from the Federal Reserve when comes to reach its goals in both employment and inflation, pouring cold water over the recent post-Minutes effervescence regarding the tapering of the bond purchase programme.
On Thursday, Atlanta Fed R.Kaplan (2023 voter, hawkish), advocated for “taking the foot gently off the accelerator”, while reiterating that many FOMC members are open to discuss the matter in the next meetings.
Friday’s US calendar highlights the advanced prints of PMIs gauged by Markit seconded by April’s New Home Sales.
What to look for around USD
The index has so far met strong support in the 89.70 region, although the Fed-led recovery seems to have met initial resistance in the low-90.00s for the time being. Looking at the broader scenario, the negative stance on the currency seems to prevail among market participants. This view has been exacerbated following April’s Payrolls, hurting at the same time the sentiment surrounding the imminent full re-opening of the US economy, which is in turn sustained by the unabated strength in domestic fundamentals, the solid vaccine rollout and once again the resurgence of taper talk in the wake of the latest FOMC Minutes.
Key events in the US this week: Flash Manufacturing PMI, Existing Home Sales (Friday).
Eminent issues on the back boiler: Biden’s plans to support infrastructure and families, worth nearly $4 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 0.12% at 89.85 and a breakout of 90.90 (weekly high May 11) would open the door to 91.07 (100-day SMA) and finally 91.43 (monthly high May 5). On the other hand, the next support emerges at 89.68 (monthly low May 19) followed by 89.20 (2021 low Jan.6) and then 88.94 (monthly low March 2018).
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