US Dollar Index eases from tops, back near 92.60

  • DXY deflates from multi-month tops around 92.80.
  • FOMC Minutes showed no rush to start the tapering process.
  • Weekly Initial Claims will be in the limelight later in the NA session.

The greenback, when gauged by the US Dollar Index (DXY), trades with marginal losses around 92.60 following Wednesday’s new tops in the 92.80/85 band.

US Dollar Index looks to data

The index now comes under some mild downside pressure as market participants continue to gauge the recently released FOMC Minutes (Wednesday).

In fact, despite the Minutes showed members favoured starting discussions about tapering the bond purchase programme earlier than anticipated, several members were also inclined to keep the patient stance as the “substantial further progress” in key fundamentals remain to be seen.

On another front, the risk-off mood appears still propped up by rising cases of the Delta variant of the coronavirus across the world, lending legs to the rally in US bonds and thus forcing US 10-year yields to break below the key 1.30% level so far this morning.

In the data space, the weekly Initial Claims are due later as usual seconded by the EIA’s report on US crude oil supplies.

What to look for around USD

The recovery in DXY clinched new tops near 92.90 and the focus is now on the 93.00 neighbourhood ahead of YTD tops in the 93.50 zone. The FOMC Minutes did show early tapering discussions and a positive assessment of the pace of the US recovery, which kind of underpins the improved sentiment surrounding the buck. However, extra upside in the index could be mitigated, as the patient stance from the Federal Reserve seems to prevail for the time being.

Key events in the US this week: Initial Claims, Consumer Credit Change (Thursday).

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 losing 0.06% at 92.65 and faces the next support at 91.51 (weekly low Jun.23) followed by 91.40 (200-day SMA) and finally 89.53 (monthly low May 25). On the upside, 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).

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