US Dollar Index moves to 3-day highs above 90.20 ahead of CPI

  • DXY gathers extra traction above the 90.00 mark.
  • US CPI for the month of May takes centre stage.
  • Yields of the US 10-year note look to regain 1.50%.

The greenback, when tracked by the US Dollar Index (DXY), regains the smile and pushes further north of the 90.00 mark on Thursday.

US Dollar Index focuses on key data, ECB

The index manages to post decent gains so far in the European morning, always above the 90.00 yardstick and amidst a mild rebound in yields of the US 10-year benchmark to the 1.50% neighbourhood.

In the meantime, cautiousness prevails among investors ahead of key data releases, somewhat relegating developments regarding the economic recovery and the progress of the vaccine rollout and refocusing the attention to inflation expectations instead.

In the US docket, all the attention will be on the publication of May’s inflation figures gauged by the CPI, with consensus expecting headline consumer prices to rise 4.7% from a year earlier and Core prices at 3.4% over the last twelve months.

In addition, investors are also expected to closely follow the ECB monetary policy meeting, with a potential modification of the asset purchase programme in the centre of the debate.

What to look for around USD

The index seems to have met a tough barrier in the 90.50/60 band for the time being. Disappointing NFP figures in May now underpin the Fed’s narrative that it is still premature to start the tapering talk. In spite of the recent strength in the dollar, the outlook for the currency remains on the negative side in the longer run. This view stays supported by the perseverant mega-dovish stance from the Federal Reserve (until “substantial further progress” in inflation and employment is made) in place for the foreseeable future and rising optimism on a strong global economic recovery.

Key events in the US this week: Inflation figures tracked by the CPI, Initial Claim (Thursday) – Flash June Consumer Sentiment.

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 0.13% at 90.25 and a breakout of 90.62 (weekly high Jun.4) would open the door to 90.90 (weekly high May 13) and finally 91.05 (100-day SMA). On the other hand, the next contention emerges at 89.53 (monthly low May 25) followed by 89.20 (2021 low Jan.6) and then 88.94 (monthly low March 2018).

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