US Dollar Index hold on to gains around 92.40, focus on Powell, data

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, struggles to get a clear direction around the 92.40 region on Thursday.

US Dollar Index now looks to Powell, data

The index attempts to grab some buying interest following Wednesday’s sharp selloff from the area of monthly peaks in the 92.80/85 band.

The renewed selling pressure in the buck came in response to the remarks from Chief Powell before testifying to the Congress on Wednesday. Powell once again reiterated the transitory stance of current high inflation, while at the same time he stressed that the “substantial further progress” still remains distant, pushing back any speculation of an earlier-than-anticipated tapering of the bond-purchase programme.

Further weakness in the dollar now echoes the downward path in yields of the key US 10-year note, which relentlessly approach the 1.30% yardstick so far on Thursday.

Later in the US data space, the usual weekly Initial Claims are due seconded by the Philly Fed Index, the NY Empire State Index and Industrial/Manufacturing Production, all ahead of the second testimony by Chief Powell to the Congress, this time before the Committee on Banking, Housing and Urban Affairs.

What to look for around USD

The recovery in DXY flirted with monthly tops around 92.80 on Wednesday on the back of the improved sentiment now surrounding the dollar, just to shed part of those gains afterwards as investors assessed the dovish message from Powell at his first testimony. The positive stance in the index, however, remains underpinned by the solid pace of the economic recovery, higher-than-expected inflation figures and rising rumours of rate hikes earlier than estimated. The latter leaves well alive the debate between the Fed and the markets’ views.

Key events in the US this week: Initial Claims, Powell’s second Semiannual testimony, Philly Fed Index, Industrial Production (Thursday) – 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 losing 0.03% at 92.33 and faces the next support at 91.51 (weekly low Jun.23) followed by 91.37 (200-day SMA) and finally 89.53 (monthly low May 25). On the other hand, 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).