US Dollar Index comes under pressure near 91.90

The greenback, in terms of the US Dollar Index (DXY) returns to the 91.70 region after the failed attempt to test 92.00 earlier in the session.

US Dollar Index now looks to data

The index gives away part of the earlier advance to the 91.90 region and now clings to marginals gains on the back of the rebound in the risk complex.

The dollar charted a negative session on Tuesday after Chief Powell reiterated once again that high inflation is seen as transient, while stressing that any talk of a rate hike should be ruled out. In line with Powell’s testimony, NY Fed J.Williams noted the labour market still needs to improve a lot while San Francisco Fed M.Daly suggested the economy is still far from normalizing.

The lack of conviction in the buck to advance further can be found in the steady activity in yields of the US 10-year note, while 2-year yields eased some ground following the post-FOMC rise.

Later in the US docket, weekly MBA Mortgage Applications are due in first turn seconded by advanced PMIs from Markit and New Home Sales and the weekly report on US crude oil supplies by the EIA.

In addition, Atalnta Fed R.Bostic (voter, centrist) and FOMC Governor M.Bowman (permanent voter, centrist) are due to speak.

What to look for around USD

The dollar remains under some mild downside pressure so far this week on the back of the improved mood in the risk complex. The likeliness that the tapering talk could kick in before anyone had anticipated and the view of higher rates in 2023 (or before) fuelled the sharp bounce in the buck to levels last seen in mid-April and introduced some uncertainty into the debate surrounding the extension of the “transient” inflation. The strong upside in DXY was also supported by higher yields in the shorter end of the curve, while yields of the key 10-year note stay muted around recent lows. In the meantime, further progress on the reopening of the economy, the vaccine rollout and results from key fundamentals remain key for the dollar’s price action/sentiment in the short-term horizon.

Key events in the US this week: New Home Sales, flash Manufacturing PMI (Wednesday) – Final Q1 GDP, Durable Goods Orders, Initial Claims (Thursday) – Core PCE, final 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 0.03% at 91.73 and a breakout of 92.40 (monthly high Jun.18) would open the door to 92.46 (23.6% Fibo level of the 2020-2021 drop) and finally 93.43 (2021 high Mar.21). On the other hand, the next support is located at 91.49 (200-day SMA) followed by 91.11 (100-day SMA) and finally 89.53 (monthly low May 25).