US Dollar Index meets resistance near 91.40 ahead of ISM, Powell

DXY reverses Friday’s gains above the 91.00 mark.
US yields struggle for direction above 1.60% so far.
The ISM Manufacturing will take centre stage later in the session.

Pablo Piovano FXStreet

The greenback, when tracked by the US Dollar Index (DXY), has so far met a decent hurdle around 91.40 at the beginning of the week.

US Dollar Index looks to data

The index reverses the initial optimism and fades earlier gains to the 91.40 area despite the steady performance of US yields and against the backdrop of the rising optimism on the US economic rebound.

In fact, the latter remains supported by better-than-expected results in domestic fundamentals in past weeks as well as the solid pace of the vaccination campaign.

In the US docket, all the looks will be upon the ISM Manufacturing later in the day seconded by Markit’s final Manufacturing PMI for the month of April. In addition, Chairman J.Powell is due to speak.

What to look for around USD

The sharp April pullback in the dollar seems to have met decent contention in the 90.40 region (April 29), staging quite a strong rebound well past the 91.00 mark on the last trading day of the month. The optimism regarding the imminent full re-opening of the US economy has been gathering further traction as of late, propped up at the same time by the unabated strength in domestic fundamentals, the solid vaccine rollout and once again the resurgence of the market chatter regarding an anticipated tapering. The latter comes in despite Fed’s efforts to talk down this scenario, at least for the next months.

Key events in the US this week: ISM Manufacturing (Monday) – Factory Orders (Tuesday) – ADP Report, ISM Non-Manufacturing (Wednesday) – Initial Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate (Friday).

Eminent issues on the back boiler: Biden’s plans to support infrastructure and families worth nearly $4 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 0.04% at 91.25 and faces the next support at 90.42 (monthly low Apr.29) followed by 89.68 (monthly low Feb.25) and then 89.20 (2021 low Jan.6). On the other hand, a breakout of 91.42 (high Apr.21) would open the door to 91.70 (50-day SMA) and finally 91.97 (200-day SMA).

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.

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