US Dollar Index clinches new highs around 90.30

The greenback returns to the positive territory and pushes the US Dollar Index (DXY) to fresh highs around 90.30.

US Dollar Index up on higher inflation

The index resumes the uptrend following the earlier dip to as low as the proximity of the 90.00 yardstick in the second half of the week.

The upbeat tone in the dollar comes after US inflation figures surprised to the upside in the month of May. In fact, the headline CPI rose 5.0% from a year earlier, while the Core CPI advanced 3.8%, both prints coming in above forecasts.

Further buying interest in the buck came in response to another print below the 400K mark from weekly claims, this time at 376K (385K prev.)

In the meantime, price action around the index stays volatile amidst the US economic bounce narrative, yields, the vaccine rollout and the sustainability of higher inflation in the upcoming months.

What to look for around USD

The index seems to have met a tough barrier in the 90.50/60 band for the time being. Disappointing NFP figures in May now underpin the Fed’s narrative that it is still premature to start the tapering talk. In spite of the recent strength in the dollar, the outlook for the currency remains on the negative side in the longer run. This view stays supported by the perseverant mega-dovish stance from the Federal Reserve (until “substantial further progress” in inflation and employment is made) in place for the foreseeable future and rising optimism on a strong global economic recovery.

Key events in the US this week: Flash June Consumer Sentiment (Friday).

Eminent issues on the back boiler: Biden’s plans to support infrastructure and families, worth nearly $6 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 0.02% at 90.15 and a breakout of 90.62 (weekly high Jun.4) would open the door to 90.90 (weekly high May 13) and finally 91.05 (100-day SMA). On the other hand, the next contention emerges at 89.53 (monthly low May 25) followed by 89.20 (2021 low Jan.6) and then 88.94 (monthly low March 2018).