- DXY climbed to new monthly highs in the 93.50/55 band.
- The dollar keeps digesting the recent FOMC event.
- Chicago Fed Index, Initial Claims, flash PMI next in the docket.
After recording fres monthly peaks past the 93.50 level, the greenback gives away those gains and returns to the 93.30 region when measured by the US Dollar Index (DXY).
US Dollar Index now looks to data releases
The index fades part of the Wednesday’s advance and retreats from earlier new September highs near 93.55, as investors continue to adjust to the FOMC meeting (Wednesday) and the risk complex manages to regain the smile somehow.
The drift lower in the dollar comes despite the rebound in yields of the US 10-year note to the 1.33% area, challenging at the same time the post-Powell’s bounce.
It is worth recalling that at his press conference Chief Powell suggested the Fed could start cropping its bond-purchase programme “soon”, although he reiterated that the labour market needs further improvement to reach the tapering threshold. Chairman Powell also discarded any link between the start of the QE tapering and the timetable for the lift-off in rates.
Still around the Fed, members remain divided on the dots-plot, were many still favour higher rates as soon as the next year.
Busy day in the US data space, where the weekly Claims will take centre stage seconded by flash PMIs, the CB Leading Index and the Chicago Fed Index.
What to look for around USD
The index recorded fresh tops for the month of September just above 93.50 earlier on Thursday, just to give away part of those gains soon afterwards. The hawkish tone from Chief Powell at the FOMC event lent fresh legs to the buck and US yields and could be the prologue of further gains in the not-so-distant future. As usual in past weeks, tapering speculations, higher yields and positive results from US fundamentals should remain supportive of the dollar moving forward.
Key events in the US this week: Initial Claims, Flash Manufacturing PMI, CB Leading Index (Thursday) – New Home Sales, Chairman Powell speech (Friday).
Eminent issues on the back boiler: Biden’s multi-trillion 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. Debt ceiling debate. Geopolitical risks stemming from Afghanistan.
US Dollar Index relevant levels
Now, the index is losing 0.15% at 93.29 and a break above 93.52 (monthly high Sep.23) would open the door to 93.72 (2021 high Aug.20) and then 94.30 (monthly high Nov.4 2020). On the flip side, the next down barrier emerges at 92.32 (weekly low Sep.14) seconded by 91.94 (monthly low Sep.3) and finally 91.78 (monthly low Jul.30).
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