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US Dollar Index climbs to 3-day highs past 94.20

  • DXY gathers extra pace and retests the 94.20/25 band.
  • US yields trade on the defensive with the 10y easing to 1.58%.
  • Weekly Claims, Challenger Job Cuts, Trade Balance next on tap.

The US Dollar Index (DXY), which measures the greenback vs. a bundle of its main rival currencies, resumes the upside and clinches new 3-day highs in the 94.20/25 band on Thursday.

US Dollar Index looks to data, yields

The index regains the 94.00 hurdle and beyond and manages to leave behind Wednesday’s post-FOMC pullback against the backdrop of the sour mood in the risk complex and despite the corrective downside in US yields.

The dollar lost momentum on Wednesday after the FOMC event did not leave room for surprises. Indeed, the Committee announced the Fed will start tapering its stimulus programme at a $15B per month ($10M in Treasuries and $5B in MBS) and it is forecast to end at some point by mid-2022. Later, Chairman Powell reiterated that the start of the QE tapering has no implications on any timing for the interest rate lift-off.

In the US data space, Challenger Job Cuts, the usual Initial Claims and Balance of Trade figures are all due later in the NA session.

What to look for around USD

The index managed to regain the 94.00 barrier and above on the back of the renewed offered stance in the risk-associated universe. In the meantime, and while investors continue to digest the Fed meeting, a vigilant stance is expected to prevail in light of Friday’s Nonfarm Payrolls. In addition, the greenback should continue to closely track the performance of US yields and the progress of the current elevated inflation as well as views from Fed’s rate-setters regarding the probability that high prices could linger for longer, all along the performance of the economic recovery against the backdrop of unabated supply disruptions and the equally incessant raise in coronavirus cases.

Key events in the US this week: Balance of Trade, Initial Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate (Friday).

Eminent issues on the back boiler: Discussions around Biden’s multi-billion Build Back Better plan. US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. Debt ceiling debate. Geopolitical risks stemming from Afghanistan.

US Dollar Index relevant levels

Now, the index is gaining 0.37% at 94.20 and a break above 94.30 (weekly high Oct.29) would open the door to 94.56 (2021 high Oct.12) and then 94.74 (monthly high Sep.24 2020). On the flip side, the next down barrier emerges at 93.27 (monthly low October 28) followed by 92.98 (weekly low Sep.23) and finally 92.32 (low Sep.14).

Author

Pablo Piovano

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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