US Dollar Index looks for direction near 91.70 ahead of data

The greenback fluctuates between gains and losses around the 91.70 area when tracked by the US Dollar Index (DXY) on Thursday.

US Dollar Index looks to data

The index fades Wednesday’s small advance and extends the consolidation in the lower end of the weekly range, with losses so far contained around the 200-day SMA in the mid-91.00s.

In the meantime, yields of the key US 10-year note continue to navigate in a muted fashion around the 1.50% yardstick.

On the Fed’s front, Atlanta Fed R.Bostic said on Wednesday that the tapering of the bond-purchase programme could kick in in some months, while he favoured a rate hike next year and sees two rate hikes in 2023. Afterwards, Governor M.Bowman poured some cold water after she suggested that the labour market still runs well below the Fed’s goal.

Later in the session, the final Q1 GDP figures are due seconded by Durable Goods Orders, advanced Goods Trade Balance results and the usual Initial Claims. In addition, NY Fed J.Williams (permanent voter, centrist) is also due to speak.

What to look for around USD

The dollar remains under some mild downside pressure so far this week on the back of the improved mood in the risk complex. The likeliness that the tapering talk could kick in before anyone had anticipated and the view of higher rates in 2023 (or before) fuelled the sharp bounce in the buck to levels last seen in mid-April and introduced some uncertainty into the debate surrounding the extension of the “transient” inflation. The strong upside in DXY was also supported by higher yields in the shorter end of the curve, while yields of the key 10-year note stay muted around recent lows. In the meantime, further progress on the reopening of the economy, the vaccine rollout and results from key fundamentals remain key for the dollar’s price action/sentiment in the short-term horizon.

Key events in the US this week: Final Q1 GDP, Durable Goods Orders, Initial Claims (Thursday) – Core PCE, final June Consumer Sentiment (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 losing 0.01% at 91.78 and faces the next support at 91.51 (weekly low Jun.23) followed by 91.11 (100-day SMA) and finally 89.53 (monthly low May 25). On the other hand, a breakout of 92.40 (monthly high Jun.18) would open the door to 92.46 (23.6% Fibo level of the 2020-2021 drop) and finally 93.43 (2021 high Mar.21).