US Dollar Index climbs to new highs above 91.40 ahead of data, Fedspeak

The US Dollar Index (DXY), which tracks the greenback vs. its main rivals, extends the positive mood and reaches new peaks in the 91.40/45 band on Wednesday.

US Dollar Index up on higher yields, looks to data

The index advances for the second session in a row on Wednesday and extends the positive momentum after bottoming out in monthly lows around 90.40 (April 29).

Yields of the key US 10-year reference retake the 1.60% hurdle so far and lend further support to the buck, while Tuesday’s comments by former Fed Chairwoman Janet Yellen, who suggested higher rates in order to prevent the economy from overheating, also collaborate with the upbeat sentiment in the currency.

Later in the NA session, the centre of the debate will be on the ADP report for the month of April seconded by the ISM Non-Manufacturing. In addition, Chicago Fed C.Evans (voter, centrist), Boston Fed E.Rosengren (2022 voter, hawkish) and Cleveland Fed L.Mester (2022 voter, hawkish) are all due to speak throughout the day.

What to look for around USD

The index keeps pushing higher following April’s lows in the 90.40 region (April 29) and the recent breakout of the 91.00 hurdle. The optimism surrounding the dollar is backed on the imminent full re-opening of the US economy, 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: ADP Report, ISM Non-Manufacturing (Wednesday) – Initial Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate (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 0.13% at 91.40 and a breakout of 91.74 (50-day SMA) would open the door to 91.94 (200-day SMA) and finally 92.46 (23.6% Fibo of the 2020-2021 sell-off) . On the other hand, the next support emerges at 90.42 (monthly low Apr.29) followed by 89.68 (monthly low Feb.25) and then 89.20 (2021 low Jan.6).