US Dollar Index clings to gains around 92.30 ahead of US CPI

DXY trades without clear direction in the 92.20/30 band.
Markets’ attention remains on the release of June CPI later on Tuesday.
Later in the week, Powell’s testimonies will take centre stage.

Pablo Piovano FXStreet

The greenback, in terms of the US Dollar Index (DXY), exchanges gains with losses in the low-92.00s so far on turnaround Tuesday.

US Dollar Index focuses on CPI

The index looks to add to Monday’s advance although the cautious note prevails among investors ahead of the publication of the June inflation figures tracked by the CPI later in the session.

The recovery in US 10-year yields to the vicinity of the 1.40% yardstick seems to have lent further legs to the recent rebound in the buck as well, all amidst the muted performance in volatility (measured by the VIX, aka “the panic index”) and the broad-based rangebound theme in the global markets.

Other than the June CPI, the US docket includes the NFIB Business Optimism Index, a 30-year bond auction and the weekly report on crude oil supplies by the API.

What to look for around USD

The recovery in DXY clinched new tops near 92.90 before easing to the vicinity of the 92.00 neighbourhood at the end of last week. The latest FOMC Minutes did show early tapering discussions, a positive assessment of the pace of the US recovery and hints that high inflation could last longer than initially estimated, all of this underpinning the improved sentiment around the buck. However, the latest Payrolls results kind of supported the patient stance from the Federal Reserve and carry the potential to temper a more serious upside in the dollar.

Key events in the US this week: June CPI (Tuesday) – Powell’s Semiannual testimony, Fed’s Beige Book (Wednesday) – Initial Claims, Powell’s Semiannual testimony, Philly Fed Index, Industrial Production (Thursday) – Retail Sales, advanced July Consumer Sentiment (Friday).

Eminent issues on the back boiler: Biden’s multi-billion plan to support infrastructure and families. 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 0.07% at 92.28 a breakout of 92.84 (monthly high Jul.7) would open the door to 93.00 (round level) and finally 93.43 (2021 high Mar.21). On the other hand, the next support emerges at 91.51 (weekly low Jun.23) followed by 91.38 (200-day SMA) and finally 89.53 (monthly low May 25).

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.

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