US Dollar Index struggles for direction near 91.00 ahead of data
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US Dollar Index struggles for direction near 91.00 ahead of data

  • The dollar eases some ground following yearly tops near 91.30.
  • The dollar’s upside appears undermined by dovish Fed, reflation trade.
  • The ADP report, ISM Non-Manufacturing, EIA’s report all due later.

The greenback, in terms of the US Dollar Index (DXY), comes under some selling pressure around the 91.00 neighbourhood.

US Dollar Index looks to data

The index extended the march further north of the 91.00 hurdle on Tuesday, clinching at the same time new YTD highs around 91.30, although losing some upside impetus soon afterwards.

The upside momentum in the dollar comes in tandem with the rebound in US 10-year yields to the area above 1.11% following the monthly drop to the 1.06% area (Monday). However, extra gains in the buck appears unsustainable in the short-term horizon on the back of the reflation trade and the persistent dovish stance from the Federal Reserve.

In the US data space, the ADP report for the month of January is due in the first turn followed by the ISM Non-Manufacturing and the weekly report on US crude oil supplies by the EIA.

What to look for around USD

DXY regained upside traction and clinched new YTD highs above 91.00 on Tuesday on the back of the renewed offered bias in the risk-associated universe. The continuation of the uptrend in the dollar, however, is forecast to remain somewhat contained amidst the fragile outlook for the currency in the medium/longer-term, and always against the backdrop of the current massive monetary/fiscal stimulus in the US economy, the “lower for longer” stance from the Fed and prospects of a strong recovery in the global economy.

US Dollar Index relevant levels

At the moment, the index is retreating 0.15% at 91.06 and faces initial support at 90.42 (21-day SMA) followed by 89.20 (2021 low Jan.6) and finally 88.94 (monthly low March 2018). On the upside, a breakout of 91.28 (2021 high Feb.2) would open the door to 91.87 (100-day SMA) and finally 92.46 (23.6% Fibo of the 2020-2021 drop).

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