US Dollar Index manages to regain the 90.00 region

The dollar adds to Tuesday’s gains above 90.00.
US 10-year yields stay supported by the 1.60% level.
MBA Mortgage Applications, IBD/TIPP Index, API next on tap.

Pablo Piovano FXStreet

The dollar regains the smile in the middle of the week and retakes the key 90.00 neighbourhood when measured by the US Dollar Index (DXY).

US Dollar Index looks to data, yields

The index advances for the second consecutive session so far on Wednesday and manages well to bounce off weekly lows in the 89.70/65 band (Tuesday).

The better tone in US yield plus positive results from the US docket on Tuesday lent further support to the buck, as market participants seems to have fully digested Friday’s PCE data.

In fact, yields of the US 10-year reference once again surpassed the 1.60% region, where are now looking to consolidate, and collaborate with the steepening of the 2y-10y yield curve.

Later in the US data space, MBA’s Mortgage Applications are due seconded by the IBD/TIPP Index and the weekly report by the API on crude oil supplies. The Fed will also release the Beige Book.

Still on the Fed, Chicago Fed C.Evans (voter, centrist), Philly Fed P.Harker (2023 voter, hawkish) and Atlanta Fed R.Bostic (voter, centrist) are all due to speak later in the session.

What to look for around USD

The index regains some composure along with the recovery of the 90.00 yardstick so far this week. Looking at the broader scenario, the negative stance on the dollar seems to prevail among market participants, as speculation of higher inflation in the medium-term now looks to have lost momentum and the US economic outperformance narrative seems almost fully priced in. Bolstering the bearish view on the buck emerges further confirmation of the Fed’s mega-accommodative stance for the foreseeable future, as per recent FOMC Minutes and Fed-speakers.

Key events in the US this week: Fed’s Beige Book (Wednesday) – ADP Report, Initial Claims, ISM Non-Manufacturing (Thursday) – Nonfarm Payrolls, 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 0.18% at 90.08 and a breakout of 90.44 (weekly high May 28) would open the door to 90.90 (weekly high May 13) and finally 91.06 (100-day SMA). On the downside, the next support lines up at 89.53 (monthly low May 25) followed by 89.20 (2021 low Jan.6) and then 88.94 (monthly low March 2018).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

AUD/USD hangs close to monthly lows, still defends 0.7100 ahead of Fed decision

AUD/USD retains its negative bias for the third straight day, defending 0.7100 while trading close to a monthly low in Wednesday's Asian session on Wednesday. The US Dollar stands firm near a two-week high as the anticipated Fed rate hike and oil-driven inflation fears continue to push US bond yields to a multi-year high. Furthermore, escalating Middle East tensions benefit the safe-haven buck and weigh on the risk-sensitive Aussie.

USD/JPY holds firm above 155.00, awaits Fed policy announcements

USD/JPY climbs to a fresh one-week high above 155.00 in the Asian session on Wednesday amid a bullish US Dollar. Oil-driven inflation fears, along with the anticipated Fed rate hike, continue to support surging US bond yields. Moreover, rising US-Iran tensions underpin the USD's reserve currency status. The pair, however, remains below the mid-155.00s as bulls seem hesitant ahead of the Fed decision later today and the BoJ meeting, starting on Thursday.

Gold traders seem noncommittal below $4,350; eyes Fed rate decision

Gold clings to modest intraday gains through the first half of the European session, albeit it lacks follow-through buying and remains below $4,350. The US Dollar eases from a two-week high amid some profit-taking, offering support to the commodity. Traders, however, seem hesitant to place aggressive directional bets and opt to wait on the sidelines heading into the key central bank event risk.

Cardano's bearish breakout warns of a 15% downside risk

Cardano (ADA) hovers around $0.1900 at press time on Wednesday after a 6% decline the previous day, breaking below a crucial support level. Declining on-chain activity across the Cardano ecosystem, with reduced transaction count and Real Economic Value (REV), suggests waning user demand.

Fed decision in focus

Starting with the most important, the Fed decision. Heading into the event, data showed a rather punchy US August jobs report, which, you will likely recall, triggered a hawkish Fed rate repricing in rates markets. However, the recent US August CPI print mattered more.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.