US Dollar Index pushes higher to the 91.60 zone ahead of data

DXY extends the sharp rebound further north of 91.00.
The dollar regains traction following the FOMC event.
Initial Claims, Philly Fed Index, Yellen next on tap.

Pablo Piovano FXStreet

The dollar keeps pushing higher and extends the recent breakout of the 91.00 yardstick when tracked by the US Dollar Index (DXY).

US Dollar Index bid post-Fed

The index is up for the third session in a row on Thursday and advances past the key 200-day SMA (91.51), all following Wednesday’s FOMC event.

In fact, the Fed brough forward any chances of starting the tapering talk at its meeting on Wednesday, while the “dots plot” now projects two interest rate hikes by end of 2023. Regarding inflation, the Fed sticks to the view that consumer prices will return to the target at some point in 2022.

In the wake of the Fed’s meeting, yields of the key US 10-year reference leapt to the vicinity of 1.60% from sub-1.50% levels, while the 5-year breakeven eased to 2.41%.

Later in the US docket, Treasury Secretary J.Yellen will testify before the House Ways and Means Committee on FY2022 budget. In the data space, weekly Claims are due seconded by the Philly Fed manufacturing gauge.

What to look for around USD

The index jumped beyond the 91.00 mark in the wake of the unexpected upbeat tone from the FOMC event on Wednesday. The likeliness that the tapering talk could kick in before anyone has anticipated and the views of higher rates by end of 2023 fuel the change of heart in the buck and the upside in DXY 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.

Key events in the US this week: Initial Claims, Philly Fed Index (Thursday).

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 0.26% at 91.63 and a breakout of 92.00 (round level) 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).

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.