US Dollar Index clings to gains around 92.30 ahead of FOMC

DXY trades within a tight range around 92.30.
US yields extend the decline below the 1.65% level.
The FOMC Minutes will take centre stage later in the session.

Pablo Piovano FXStreet

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main rivals, trades within a narrow range around the 92.30 region.

US Dollar Index weaker on yields, looks to FOMC

The index trades on the negative footing so far this week and extends the corrective downside after hitting new 2021 peaks in the 93.40/45 band during the past week.

The corrective downside in US yields continue to put the buck under pressure on Wednesday. Indeed, yields of the key US 10-year reference break below the 1.65% level to trade in new multi-day lows. The upbeat mood in the risk-associated universe also underpins the outflows from the dollar.

Later in the US data space, all the attention is expected to gyrate around the publication of the FOMC Minutes. In the docket, weekly MBA Mortgage Applications are due followed by February’s Trade Balance figures and the EIA’s report on crude oil inventories.

In addition, Chicago Fed C.Evans (2023 voter, centrist) and Richmond Fed T.Barkin (voter, centrist) are also due to speak.

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 key 200-day SMA around 92.40. In addition, the recently approved fiscal stimulus package adds to the ongoing outperformance of the US economy narrative as well as the investors’ perception of higher inflation in the next months, all morphing into extra oxygen for the dollar. However, 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: FOMC Minutes (Wednesday) – initial Claims, Powell’s speech (Thursday) – 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 0.07% at 92.36 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 support emerges at 92.25 (weekly low Apr.7) followed by 91.46 (50-day SMA) and then 91.30 (weekly low Mar.18).

Author

Pablo Piovano

FXStreet

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

EUR/USD looks sidelined below 1.1600

EUR/USD remains on the back foot in the latter part of the NA session on Thursday, now attempting a consolidative theme in the sub-1.1600 region. A more cautious market mood, driven by the escalating conflict in the Middle East, together with broad-based strength in the US Dollar, is favouring the continuation of the leg lower in spot.

GBP/USD stays offered near 1.3340

GBP/USD fades Wednesday’s uptick and trades with decent losses in the 1.3340 zone in the latter part of Thursday’s session. Cable’s weakness, alongside the rest of the risk complex, follows the strong performance of the Greenback amid intense geopolitical jitters.

Gold: further weakness could challenge $5,000

Gold comes under fresh selling pressure on Thursday, slipping back below the $5,100 mark per troy ounce. Persistent strength in the US Dollar (USD) is preventing the yellow metal from building a meaningful recovery, even as markets remain risk-averse amid the deepening conflict in the Middle East.

Crypto Today: Bitcoin, Ethereum, XRP hold weekly gains despite US-Iran war

The cryptocurrency market is gaining strength on Thursday, building on Wednesday's upswing, which saw Bitcoin reach a weekly high above $74,000. Ethereum and Ripple are moderating their recent gains amid uncertainty stemming from the escalating war in the Middle East.

Two PMIs, two Chinas

China’s economic data are often treated with a degree of caution by global investors. The challenge is not necessarily that the numbers are incorrect, but that they can describe very different parts of a vast and complex economy. Nowhere is that more evident than in China’s PMIs.

Ripple tests recovery strength amid steady ETF inflows, growing retail interest

Ripple (XRP) continues to demonstrate notable resilience as the cryptocurrency market navigates the persistent war in the Middle East after the United States (US) and Israel attacked Iran on Saturday.