US Dollar Index remains on the defensive near 92.20

DXY starts the week on a soft footing albeit above 92.00.
US markets are closed due to the Independence Day holiday.
All the attention will be on the FOMC Minutes later in the week.

Pablo Piovano FXStreet

The greenback, when tracked by the US Dollar Index (DXY), extends recent losses to the 92.20 area at the beginning of the week.

US Dollar Index looks offered, focuses on data

The index adds to Friday’s losses as market participants continue to adjust to the US labour market report. It is worth recalling that the US economy added 850K jobs in June and the jobless rate ticked higher to 5.9%.

Friday’s Payrolls figures showed the job creation remained solid during last month, all amidst a healthy recovery in the broader economy. However, the latest results reinforce the patient stance from the Fed, which has ultimately poured cold water over expectations of a sooner-than-expected taper talks

With US markets celebrating the Independence Day holiday on Monday, the focus of attention will shift to the release of the ISM Non—Manufacturing on Tuesday and the

FOMC Minutes on Wednesday.

What to look for around USD

The rally in DXY seems to have run out of steam in the 92.70 region so far. While the latest Payrolls figures might have disappointed USD-bulls somewhat, they remain solid and are indicative of the persistent improvement in the labour market. The investors’ shift in the sentiment around the dollar seems justified by the pick-up in risk aversion on the back of fresh concerns around the Delta variant of the coronavirus, strong fundamentals, high inflation and tapering prospects, particularly after the latest FOMC event.

In addition, the likeliness that the Fed could modify the bond-purchase programme before anyone had anticipated and a potential rate hike in H2 2022 have been collaborating with the change of heart in the dollar as of late and.

Key events in the US this week: ISM Non-Manufacturing (Tuesday) – MBA Mortgage Applications, FOMC Minutes (Wednesday) – Initial Claims, Consumer Credit Change (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 losing 0.02% at 92.23 and faces the next support at 91.51 (weekly low Jun.23) followed by 91.42 (200-day SMA) and finally 89.53 (monthly low May 25). On the upside, a breakout of 92.69 (weekly high Jul.1) would open the door to 93.00 (round level) and finally 93.43 (2021 high Mar.21).

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.

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