US Dollar Index pushes higher to 92.30, fresh 2-month highs


  • DXY intensifies the rally beyond the 92.00 mark.
  • US stocks market drops to 2-week lows.
  • US 10-year yields remain stuck around 1.50%.

The bid bias in the dollar stays everything but abated and now lifts the US Dollar Index (DXY) to new 2-month peaks near 92.30.

US Dollar Index up despite steady yields

The index extends the strong bounce well above the 92.00 yardstick on Friday, recording at the same time new tops in spite of the lack of direction in US yields.

In fact, yields of the key US 10-year reference navigate a consolidative range around the 1.50% level.

The dollar gathered extra steam after St Louis Fed J.Bullard somehow justified the recent hawkish message from the Federal Reserve. He also favoured ending the purchases of MBS while he hinted at the idea of a rate hike by end of 2022.

What to look for around USD

The index moved just beyond the 92.00 level as investors continue to adjust to the recent hawkish message from the FOMC at its meeting on Wednesday. The likeliness that the tapering talk could kick in before anyone has anticipated and the view of higher rates in 2023 fuel the sharp bounce in the buck to levels last seen in mid-April. However, the still unchanged view on “transient” higher inflation and hence the continuation of the dovish stance by the Federal Reserve carries the potential to temper the current momentum in the dollar. A sustained break above the critical 200-day SMA should shift the dollar’s outlook to a more constructive one.

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 0.37% at 92.23 and a breakout of 92.28 (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). On the flip side, the next contention aligns 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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