- DXY corrects lower and re-visits the 92.70 region.
- The better mood in the risk complex forces the dollar to shed ground.
- Initial Claims, Existing Home Sales, CB Leading Index next on tap.
The greenback, when measured by the US Dollar Index (DXY), extends the rejection from recent multi-month tops beyond the 93.00 mark.
US Dollar Index looks to data, ECB
The index loses ground for the second session in a row on Thursday on the back of the improvement in the sentiment surrounding the risk-associated universe and despite the recent recovery in US yields.
In fact, yields of the key US 10-year note briefly tested the1.30% neighbourhood on Wednesday after falling as low as the sub-1.13% area earlier in the week.
In the meantime, investors appear to favour the risk complex in detriment of the safe haven galaxy in spite of the persistent advance of the Delta variant of the coronavirus across the world, which carries the potential to pour cold water over global growth prospects.
Later in the US data space, the centre of attention will be on the usual weekly Claims seconded by the Chicago Fed Index, Existing Home Sales and the CB’s Leading Index for the month of June.
In addition, market participants will closely follow the ECB event, where the PEPP and a probable revision of the bank’s forward guidance will take centre stage.
What to look for around USD
DXY comes under some selling pressure following recent 3-month tops past the 93.00 yardstick. The latest positive move in the index was mainly sustained by the resumption of the risk aversion in response to the re-emergence of coronavirus concerns. The constructive stance in the dollar, in the meantime, remains propped up by the solid pace of the economic recovery, higher-than-expected inflation figures and rising rumours of rate hikes/QE tapering earlier than anticipated.
Key events in the US this week: Initial Claims, Existing Home Sales (Thursday) – Flash July Manufacturing/Services PMI (Friday).
Eminent issues on the back boiler: Biden’s multi-billion plan to support infrastructure and families. 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 losing 0.06% at 92.71 and faces the next support at 92.46 (23.6% Fibo of the November-January rally) followed by 92.00 (monthly low Jul.6) and then 91.51 (weekly low Jun.23). On the upside, a break above 93.19 (monthly high Jul.21) would open the door to 93.43 (2021 high Mar.21) and finally 94.00 (round level).
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