US Dollar Index extends the drop below 91.00

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main rivals, extends the weekly pullback further south of the 91.00 hurdle on turnaround Tuesday.

US Dollar Index weaker on risk appetite, lower yields

After recent fresh yearly peaks in the 91.60 region at the end of last week, the index sparked a correction lower that is now re-visiting the 90.70 region, where also coincide the 21- and 55-day SMAs along with the 2020-2021 line.

The move lower in US yields from recent tops around 1.20% (February 8) has been also collaborating with the downward move in the dollar, exacerbated further by the persistent improvement in the risk-associated universe.

Later in the US docket, the NFIB Index is due in the first turn seconded by the JOLTs Job Openings and the speech by St. Louis Fed J.Bullard (2022 voter, dovish) on economy and monetary policy.

What to look for around USD

The dollar’s corrective upside run out of steam in the 91.60 on Friday. Bouts of occasional strength in US yields remain the almost exclusive driver of bullish attempts in the buck helped with firm growth prospects vs. its G10 peers and auspicious (and fast) vaccine rollout. The continuation of the uptrend in the dollar, however, is forecast to be unsustainable amidst the fragile outlook for the currency in the medium/longer-term, and always against the backdrop of the current massive monetary/fiscal stimulus in the US economy, the “lower for longer” stance from the Fed and prospects of a strong recovery in the global economy, which is expected to morph into extra appetite for riskier assets.

Key events this week in the US: Inflation figures tracked by the CPI/Core CPI, Chief Powell’s speech on “The State of the US Labor Market” (Wednesday) and the preliminary gauge of the Consumer Sentiment for the month of February (Friday).

Eminent issues on the back boiler: US-China trade conflict under the Biden’s administration. Trump’s impeachment. Tapering speculation vs. economic recovery. US real interest rates vs. Europe.

US Dollar Index relevant levels

At the moment, the index is retreating 0.22% at 90.73 and faces initial support at 90.57 (55-day SMA) followed by 90,04 (weekly low Jan.21) and then 89.20 (2021 low Jan.6). On the upside, a breakout of 91.60 (2021 high Feb.5) would open the door to 91.78 (100-day SMA) and finally 92.46 (23.6% Fibo of the 2020-2021 drop).