US Dollar Index drops further and retests 90.40
|- DXY loses further ground and re-visits the 90.40 area.
- Yields of the US 10-year reference reclaim the 1.30% level.
- US flash PMIs, housing data, Fedspeak come up next in the docket.
The greenback, when gauged by the US Dollar Index (DXY), remains under pressure and drops to multi-day lows around 90.40 on Friday.
US Dollar Index looks to data, yields
The index loses ground for the second straight session at the end of the week despite the improved tone in US yields. In fact, DXY now flirts with the 55-day SMA around 90.40 and re-targets the key 2020-2021 support line, coincident with the 90.00 neighbourhood.
Higher yields did not morph into further dollar strength in past hours, allowing the risk complex to regain some ground lost as of late, always against the usual backdrop of the reflation/vaccine trade and rising speculations that a fresh fiscal stimulus package could be approved sooner rather than later.
In the US data space, Markit will publish its preliminary gauges for the Manufacturing/Services PMIs for the month of February seconded by Existing Home Sales and speeches by Richmond Fed T.Barkin (voter, centrist) and Boston Fed E.Rosengren (2022 voter, hawkish).
What to look for around USD
The corrective upside in the index appears to have met a decent hurdle near the 91.00 yardstick recently, always following the renewed correlation to US yields. However, bullish attempts in the buck should remain short-lived amidst the broad-based fragile outlook for the currency in the medium/longer-term. The latter is sustained by the (reinforced) accommodative stance from the Fed, extra fiscal stimulus and prospects of a strong recovery in the global economy, which are seen underpinning the better sentiment in the risk-associated space.
Key events in the US this week: February flash PMIs (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 losing 0.24% at 90.37 and faces immediate contention at 90.22 (weekly low Feb.16) followed by 90.04 (weekly low Jan.21) and then 89.20 (2021 low Jan.6). On the flip side, a breakout of 91.05 (weekly high Feb.17) would open the door to 91.49 (100-day SMA) and finally 91.60 (2021 high Feb.5).
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