US Dollar Index loses the grip and drops to 92.50 ahead of key data

  • DXY drops to 2-day lows in the 92.50 region on Tuesday.
  • US 10-year yields follow a consolidative theme around 1.32%.
  • US CPI will take centre stage later in the NA session.

The greenback gives away further ground and slip back to the 92.50 zone on turnaround Tuesday when measured by the US Dollar Index (DXY).

US Dollar Index now looks to CPI

The index loses further momentum and re-visits the the 92.50 region on turnaround Tuesday following Monday’s unsuccessful attempt to retake the 93.00 barrier. In fact, the dollar started the week on a positive note and advanced to the vicinity of the 93.00 barrier, where the bull run fizzled out.

Tuesday’s rangebound theme in DXY comes in tandem with the consolidation in yields of the key US 10-year reference note above the 1.30% against the backdrop of rising cautiousness ahead of the publication of August’s inflation figures.

Later in the NA session, all the attention will be on the release of the inflation figures tracked by the CPI for the month of August. On a secondary role comes the NFIB Business Optimism Index and the weekly report on US crude oil supplies by the API.

What to look for around USD

The rebound in DXY from recent lows has so far run out of steam near the 93.00 hurdle on Monday. Steady yields and the lack of direction in the broad risk appetite trends prompt some consolidation in the dollar in the very near term. In the meantime, perseverant COVID jitters, doubts surrounding the rebound in the US economic activity and inflation risks remain as key factors underpinning the buck for the time being.

Key events in the US this week: Inflation tracked by the CPI (Tuesday) – MBA Mortgage Applications, Industrial Production (Wednesday) – Retail Sales, Initial Claims, Philly Fed Index, Business Inventories (Thursday) – Flash September Consumer Sentiment (Friday).

Eminent issues on the back boiler: Biden’s multi-trillion 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. Debt ceiling debate. Geopolitical risks stemming from Afghanistan.

US Dollar Index relevant levels

Now, the index is losing 0.10% at 92.51 and a break above 92.88 (monthly high Sep.13) would open the door to 93.18 (high Aug.27) and then 93.72 (2021 high Aug.20). On the flip side, the next down barrier emerges at 91.94 (monthly low Sep.3) followed by 91.78 (monthly low Jul.30) and finally 91.73 (100-day SMA).

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