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.

Pablo Piovano FXStreet

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).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

USD/JPY extends sell-off toward 156.00 on hawkish BoJ repricing

USD/JPY remains under persistent selling pressure and tests 156.00 in the second half of the day on Thursday. Hawkish BoJ expectations and intervention risks continue to lend support to the Japanese Yen and weigh on the pair as investors await August ISM Services PMI data from the US.

AUD/USD ranges above 0.7150 despite upbeat Chinese PMI

AUD/USD struggles to capitalize on the previous day's bounce from a nearly two-week low and ranges above 0.7150 in Asia on Thursday, as dismal Australian trade data counter upbeat China's RatingDog Services PMI. However, the pair's upside remains in check as the US Dollar stalls the weak ADP report-led slide amid escalating US-Iran tensions and firming September Fed rate-hike bets.

Gold sticks to gains below $4,450 amid weaker USD

Gold maintains its bid tone heading into the European session, though it remains below $4,450 amid mixed fundamental cues. Sliding US bond yields and Wednesday's soft US ADP report weigh on the US Dollar, assisting the commodity build on the previous day's goodish recovery from a nearly four-week low. That said, firming US Federal Reserve rate-hike expectations and inflation risks stemming from higher energy prices could act as a tailwind for US bond yields.

XRP defends key support, XLM awaits breakout as derivatives strengthen

Ripple (XRP) and Stellar (XLM) show divergent technical outlooks as traders assess whether the recent weakness could give way to a recovery. XRP is finding support and defining a key support zone, while XLM slips below a cluster of Exponential Moving Averages (EMAs).

ISM Services PMI Preview: US service sector expected to expand in August

On Thursday, we’ll get the latest read on the US service sector when the Institute for Supply Management publishes its August gauge. Consensus points to a marginal improvement to 54.3 from July’s 54.1. If confirmed, the reading would reinforce the sector’s resilience and offer a modest boost to confidence in the broader economy. The ISM will publish the Services Purchasing Managers Index (PMI) on Thursday at 14:00 GMT.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.