US Dollar Index bounces off the 92.00 region on higher yields

The greenback, when measured by the US Dollar Index (DXY), regains the smile and advances to the 92.30 zone at the end of the week.

US Dollar Index up on higher yields

After testing lows near the 92.00 area earlier in the session, the index managed to regain buying interest and now hovers around the 92.30 region, posting decent gains for the day.

The rebound in US yields give sustain to the uptick in the dollar on Friday. Indeed, yields of the key US 10-year benchmark surpass the 1.65% levels after meeting contention in the vicinity of 1.60% on Thursday.

Looking at the broader picture, the dollar remains on the back footing so far this week after investors shifted their attention to the progress of the vaccination campaign in the Old Continent and the impact on the growth prospects.

Data wise in the US, March’s Producer Prices will be the salient event later on Friday ahead of Wholesale Inventories for the month of February.

What to look for around USD

The upside momentum in the dollar faltered ahead of the 93.50 region in past sessions, sparking a corrective downside to the vicinity of the 92.00 region. The greenback now looks under some downside pressure, as the US reflation trade and the idea of higher inflation in the next months lost some vigour. Furthermore, the mega-accommodative stance from the Fed (until “substantial further progress” in inflation and employment is made) and hopes of a strong global economic recovery (now postponed to later in the year) remain a source of support for the risk complex and carry the potential to curtail the upside momentum in the dollar in the second half of the year.

Key events in the US this week: Producer Prices (Friday).

Eminent issues on the back boiler: Biden’s new stimulus bill worth around $3 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? Future of the Republican party post-Trump acquittal.

US Dollar Index relevant levels

At the moment, the index is gaining 0.26% at 92.31 and a break above 93.43 (2021 high Mar.31) would expose 94.00 (round level) and finally 94.30 (monthly high Nov.4). On the other hand, the next contention emerges at 91.99 (weekly low Apr.8) followed by 91.52(50-day SMA) and then 91.30 (weekly low Mar.18).