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The Us Dollar Index (DXY) looks set to test higher levels near term as reopening, vaccination and stimulus produce a strapping rebound despite the Fed’s resoundingly dovish policy track, economists at Westpac inform.  

Key quotes

“DXY looks determined to test the top-end of a rough 91-93 range that is likely to form in coming weeks.”

The US is set to produce some striking rebound data in coming weeks, starting with March payrolls next week, thanks to a strong confidence-building vaccine rollout, $410bn in one-time stimulus payments to households and economic reopenings.

“Fed officials have resoundingly underscored their dovish policy track, anchoring the front-end, but long end-yields remain another matter. DXY weighted 10yr spreads have fully retraced the 2020Q1 pandemic collapse.”  

“The medium-term USD bear trend has been adjourned, until sometime in 2021H2. By then Europe should surely have her vaccination act together and second derivative US rebound measures will probably be cresting.”