- DXY extends the upside beyond the 91.00 mark.
- US yields tick higher and lend support to the dollar.
- The FOMC is largely expected to keep its accommodative stance.
The greenback, when tracked by the US Dollar Index (DXY), climbs to new 3-day highs above the 91.00 hurdle on Wednesday.
US Dollar Index bid ahead of FOMC
The index extends the weekly recovery and posts gains for the third consecutive session on Wednesday amidst the rebound in US yields.
In fact, yields of the US 10-year note manage to regain the vicinity of the 1.65% level, broadening the bounce off recent lows in the 1.53% zone.
In the meantime, the FOMC event will be the salient point this week. Market consensus, however, expects the gathering to pass by unnoticed, as the Committee is largely seen keeping the monetary conditions unchanged. This view is widely backed by latest comments from Chairman Powell and other FOMC members, who reiterated that the Fed is in no rush to modify its current status quo, let alone kick start the tapering talk.
In the US data space, weekly MBA Mortgage Applications are due seconded by advanced Goods Trade Balance figures, the flash Wholesale Inventories for the month of March and the weekly report on crude oil supplies by the EIA.
What to look for around USD
The April pullback in the dollar seems to have met some contention in the 90.70 region for the time being, always on the back of the broad-based retracement in US yields and the loss of enthusiasm on the US reflation/vaccine trade. Also weighing on the buck emerges the mega-accommodative stance from the Fed (until “substantial further progress” in inflation and employment is made), and rising optimism on a strong global economic recovery, all morphing into a solid source of support for the risk complex and a most likely driver of probable weakness in the dollar in the next months.
Key events in the US this week: FOMC meeting (Wednesday) – Flash Q1 GDP, Initial Claims (Thursday) – Core PCE, Personal Income/Spending, final April U-Mich Index.
Eminent issues on the back boiler: Biden’s new infrastructure 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?
US Dollar Index relevant levels
Now, the index is gaining 0.19% at 91.06 and a break above 91.67 (50-day SMA) would open the door to 92.02 (200-day SMA) and finally 93.43 (2021 high Mar.31). On the flip side, the next support emerges at 90.68 (monthly low Apr.26) ahead of 89.68 (monthly low Feb.25) and then 89.20 (2021 low Jan.6).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD regains the constructive outlook above the 200-day SMA
AUD/USD advanced strongly for the second session in a row, this time extending the recovery to the upper 0.6500s and shifting its focus to the weekly highs in the 0.6580-0.6585 band, an area coincident with the 100-day SMA.
EUR/USD recovers to top end of consolidation ahead of Friday’s US NFP
EUR/USD drove back to the top end of recent consolidation on Thursday, recovering chart territory north of the 1.0700 handle as market risk appetite regains balance heading into another US Nonfarm Payrolls Friday.
Gold price pullback on Fed hawkish tilt amidst lower US yields, weaker US Dollar
Gold price clings to the $2,300 figure in the mid-North American session on Thursday amid an upbeat market sentiment, falling US Treasury yields, and a softer US Dollar. Traders are still digesting Wednesday’s Federal Reserve decision to hold rates unchanged.
Bitcoin price rises 5% as BlackRock anticipates a new wave of capital inflows into BTC ETFs from investors
Bitcoin (BTC) price slid to the depths of $56,552 on Wednesday as the cryptocurrency market tried to front run the Federal Open Market Committee (FOMC) meeting. The flash crash saw millions in positions get liquidated.
FOMC in the rear-view mirror – NFP eyed
The update from May’s FOMC rate announcement proved more dovish than expected, which naturally weighed on the US dollar (sending the DXY to lows of 105.44) and US yields, as well as, initially at least, underpinning major US equity indices.