- DXY reverses two consecutive daily drops on Monday.
- US 10-year yields navigate below the 1.35% region.
- US 10-year note, 3/6-month bill auctions only due in the docket.
The greenback, when gauged by the US Dollar Index (DXY), regains some composure and advances to the 92.20 region at the beginning of the week.
US Dollar Index looks to Powell, data
The index returns to the positive territory and manages to reverse the earlier pullback to the vicinity of the 92.00 mark on Monday.
In the meantime, the risk appetite trends appear to dominate the price action in the global markets for the time being, while Powell’s testimony on the Semiannual Monetary Policy Report to the Congress and inflation figures will be the main attraction later in the week.
Additionally, yields of the key US 10-year note start the session on the defensive albeit above the 1.30%, all following last week’s lows in the 1.25% zone.
In the US docket, there will be auctions of the 10-year note, 3-month and 6-month bills.
What to look for around USD
The recovery in DXY clinched new tops near 92.90 before easing to the vicinity of the 92.00 neighbourhood at the end of last week. The latest FOMC Minutes did show early tapering discussions, a positive assessment of the pace of the US recovery and hints that high inflation could last longer than initially estimated, all of this underpinning the improved sentiment around the buck. However, the latest Payrolls results kind of supported the patient stance from the Federal Reserve and carry the potential to temper a more serious upside in the dollar.
Key events in the US this week: June CPI (Tuesday) – Powell’s Semiannual testimony, Fed’s Beige Book (Wednesday) – Initial Claims, Powell’s Semiannual testimony, Philly Fed Index, Industrial Production (Thursday) – Retail Sales, advanced July Consumer Sentiment (Friday).
Eminent issues on the back boiler: Biden’s multi-billion plan to support infrastructure and families. 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 0.05% at 92.14 a breakout of 92.84 (monthly high Jul.7) would open the door to 93.00 (round level) and finally 93.43 (2021 high Mar.21). On the other hand, the next support emerges at 91.51 (weekly low Jun.23) followed by 91.39 (200-day SMA) and finally 89.53 (monthly low May 25).
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