US Dollar Index regains traction and approaches 91.00 ahead of data

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors manages to extend the recent optimism and trades at shouting distance from the key 91.00 hurdle on turnaround Tuesday.

US Dollar Index looks to data, risk trends

After bottoming out in fresh monthly lows near 90.70 at the beginning of the week, the index now looks to extend the positive start of the week and gradually approaches the key hurdle at 91.00 the figure.

Steady yields and a pick-up in the risk aversion in response to surging coronavirus cases mainly in Asia appear to lend fresh support to the dollar in the first half of the week.

Later in the US docket, the Consumer Confidence gauge tracked by the Conference Board will take centre stage seconded by house price indexes measured by the S&P/Case-Shiller Index and the FHFA’s House Price Index and a 7-year bond auction.

What to look for around USD

The April pullback in the dollar remains well and sound, always on the back of the broad-based retracement in US yields and the loss of enthusiasm on the US reflation/vaccine trade. Also weighing on the buck emerges the mega-accommodative stance from the Fed (until “substantial further progress” in inflation and employment is made), and rising optimism on a strong global economic recovery, all morphing into a solid source of support for the risk complex and a most likely driver of probable weakness in the dollar in the next months.

Key events in the US this week: CB Consumer Confidence (Tuesday) – FOMC meeting (Wednesday) – Flash Q1 GDP, Initial Claims (Thursday) – Core PCE, Personal Income/Spending, final April U-Mich Index.

Eminent issues on the back boiler: Biden’s new infrastructure bill worth around $3 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 90.96 and a break above 91.67 (50-day SMA) would open the door to 92.04 (200-day SMA) and finally 93.43 (2021 high Mar.31). On the flip side, the next support emerges at 90.68 (monthly low Apr.26) ahead of 89.68 (monthly low Feb.25) and then 89.20 (2021 low Jan.6).