US Dollar Index bounces off new lows near 90.00

The greenback, in terms of the US Dollar Index (DXY), exchanges gains with losses near the 90.00 mark at the beginning of the week.

US Dollar Index risks further decline

The index looks to regain some composure following Friday’s strong pullback in the wake of disappointing Payrolls figures for the month of April. Indeed, it is worth recalling that the economy created 266K jobs during last month vs. expectations of nearly a million new jobs, while the jobless rate edged higher to 6.1%.

The horrible prints from the monthly US labour market report exposed the lack of further improvement in the sector and poured cold water over the US economic outperformance, removing at the same time tailwinds from the buck and forcing DXY to challenge the psychological 90.00 yardstick.

In the meantime, yields of the US 10-year reference managed to regain some traction and reclaim the 1.60% neighbourhood, always amidst the recent multi-session consolidative theme.

The US calendar will be empty of releases on Monday, with Chicago Fed C.Evans (voter, centrist) only due to speak later in the session.

What to look for around USD

The index came under extra downside pressure and another visit to the 90.00 support and probably below appears to be gaining some thought among investors. The renewed negative stance on the dollar has been exacerbated following April’s NFP, 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 the market chatter regarding an anticipated tapering. The latter comes in despite Fed’s efforts to talk down this scenario, at least for the next months.

Key events in the US this week: April CPI, Core CPI (Wednesday) - Initial Claims (Thursday) – Retail Sales, Industrial Production, flash May Consumer Sentiment (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 0.09% at 90.30 and a breakout of 91.06 (100-day SMA) would open the door to 91.43 (weekly/monthly high May 5) and then 91.90 (200-day SMA). On the downside, the next support lines up at 90.10 (monthly low May 10) followed by 89.68 (monthly low Feb.25) and then 89.20 (2021 low Jan.6).