US Dollar Index leaps to session tops around 90.50

  • DXY reverses the recent downside and re-tests 90.50.
  • US 10-year yields approach the key 1.40% mark.
  • Chicago Fed Index, Dallas Fed Index, Fedspeak next on tap.

The greenback, when tracked by the US Dollar Index (DXY), starts the day on a positive footing and advances to daily highs in the mid-90.00s on Monday.

US Dollar Index focused on data, yields

The index regains some upside pressure and reverses two pullbacks in a row at the beginning of the week, as the dollar continues to derive support from higher US yields. Against that, yields of the US 10-year Treasuries already navigate in levels close to the key 1.40% barrier, area last visited a year ago.

In the meantime, market participants continue to look to the reflation trade, the vaccine rollout and extra US fiscal stimulus as the immediate drivers of the price action surrounding the index for the time being.

In the US data space, the Chicago Fed National Activity Index is due seconded by the Dallas Fed Manufacturing Index. In addition, FOMC’s permanent voter M.Bowman (centrist) is due to speak.

What to look for around USD

The corrective upside in the index appears to have met a decent hurdle near the 91.00 yardstick recently, always following the renewed correlation to US yields. However, bullish attempts in the buck should remain short-lived amidst the broad-based fragile outlook for the currency in the medium/longer-term. The latter is sustained by the (reinforced) accommodative stance from the Fed, extra fiscal stimulus and prospects of a strong recovery in the global economy, which are seen underpinning the better sentiment in the risk-associated space.

Key events in the US this week: Consumer Confidence tracked by the Conference Board (Tuesday), Chief Powell’s semi-annual Monetary Policy Report (Wednesday), another revision of Q4 GDP and Initial Claims (Thursday) and inflation figures gauged by the PCE and the final Consumer Sentiment measure (Friday).

Eminent issues on the back boiler: 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? Future of the Republican party post-Trump acquittal.

US Dollar Index relevant levels

At the moment, the index is gaining 0.05% at 90.40 and a breakout of 91.05 (weekly high Feb.17) would open the door to 91.46 (100-day SMA) and finally 91.60 (2021 high Feb.5). On the other hand, immediate contention emerges at 90.22 (weekly low Feb.16) followed by 90.04 (weekly low Jan.21) and then 89.20 (2021 low Jan.6).

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