- DXY extends the recovery to the 92.50 area.
- Positive results from the US docket lent oxygen to the dollar.
- ISM Manufacturing, Initial Claims take centre stage in the calendar.
The upside bias in the greenback remains unabated and pushes the US Dollar Index (DXY) to fresh 3-month peaks around 92.50.
US Dollar Index now focused on data
The index keeps pushing higher and manages well to advance further north of the 92.00 mark in tandem with the improving sentiment surrounding the dollar since late June.
The dollar found extra support in the recent better-than-expected results from US fundamentals, which seem to be propping up the optimism ahead of Friday’s Nonfarm Payrolls and therefore bringing forward the probable timing of the tapering talks.
In addition, the progress of the Delta variant of the coronavirus seems to have lent some legs to the risk-off mood and threatens to tamper the global economic recovery in spite of the faster pace of the vaccination campaign across the world.
It will be an interesting session in the US calendar, as June’s ISM Manufacturing is due seconded by the weekly Claims, Challenger Job Cuts and the final gauge of Markit’s manufacturing gauge.
What to look for around USD
The index manages to clinch multi-week highs and once again flirts with the key resistance area in the mid-92.00s. The recent investors’ shift in the sentiment around the dollar seems justified by the pick-up in risk aversion on the back of pandemic concerns, strong fundamentals, high inflation and tapering prospects. Furthermore, the upcoming Nonfarm Payrolls (Friday) appear to be crucial regarding the potential timing of the kickstart of the tapering talks. In addition, the likeliness that the Fed could modify the bond-purchase programme before anyone had anticipated and a potential rate hike in H2 2022 have been collaborating with the change of heart in the dollar, particularly after the latest FOMC event.
Key events in the US this week: Initial Claim, ISM Manufacturing PMI, Markit’s June final Manufacturing PMI (Thursday) – Nonfarm Payrolls, Unemployment Rate, Balance of Trade, Factory Orders (Friday).
Eminent issues on the back boiler: Biden’s plans to support infrastructure and families, worth nearly $6 trillion. 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 0.05% at 92.40 and a breakout of 92.49 (weekly high Jul.1) would open the door to 93.00 (round level) and finally 93.43 (2021 high Mar.21). On the downside, initial contention emerges at 91.51 (weekly low Jun.23) followed by 91.44 (200-day SMA) and finally 89.53 (monthly low May 25).
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