US Dollar Index extends gains to the 92.70 region ahead of data

  • DXY adds to recent gains and approaches recent highs.
  • Powell hinted at the idea that high inflation could last longer.
  • Retail Sales, advanced July U-Mich Index, TIC Flows next on tap.

The greenback, when tracked by the US Dollar Index (DXY), extends the optimism in the second half of the week and approaches monthly tops around 92.80.

US Dollar Index looks to data

The index advances for the second session in a row and trades closer to monthly peaks located in the 92.80/85 band, always on the back of the resumption of the demand for the buck, higher US yields and after market participants seem to have already digested both testimonies by Chairman Powell.

Indeed, Chief Powell reiterated his message at the Senate on Thursday. He, however, suggested that high inflation might persist more than initially anticipated, which should prompt some re-assessment by the Federal Reserve.

Also supporting the sentiment surrounding the dollar, Chicago Fed C.Evans said that tapering of the bond-purchase programme could kick in by year-end, while St. Louis Fed J.Bullard advocated for the removal of current emergency measures.

In the bonds market, yields of the key US 10-year note gain a coupled of bps after bottoming out near 1.30% on Thursday.

It is expected to be an interesting day in the US docket, where Retail Sales and the preliminary gauge of the Consumer Sentiment for the month of July will take centre stage seconded in relevance by the TIC Flows.

What to look for around USD

The recovery in DXY flirts with monthly tops around 92.80 so far amidst the solid buying bias surrounding the dollar. The positive stance in the index, in the meantime, remains underpinned by the solid pace of the economic recovery, higher-than-expected inflation figures and rising rumours of rate hikes/QE tapering earlier than anticipated.

Key events in the US this week: 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 0.15% at 92.69 and 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 down barrier lines up at 91.51 (weekly low Jun.23) followed by 91.37 (200-day SMA) and finally 89.53 (monthly low May 25).

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