US Dollar Index remains under pressure below 90.00 ahead of data

DXY loses the grip further and slips back below 90.00.
US 10-year yields edge higher and surpass 1.60%.
ISM Manufacturing, final Markit Manufacturing PMI next on tap.

Pablo Piovano FXStreet

The greenback, when gauged by the US Dollar Index (DXY), loses further momentum and breaches the key support at 90.00 the figure.

US Dollar Index now focuses on data

The index adds to Monday’s retracement below the 90.00 yardstick amidst a generalized side-lined theme in the global markets and the gradual return to the normal activity in the US following the Memorial Day holiday.

The move lower in the dollar comes despite the bounce in US 10-year yields to the vicinity of the 1.62%, while the 10y-2y yield spread continues to play against dollar strength.

Later in the US data space, the ISM Manufacturing for the month of May will take centre stage seconded by the final reading of the Markit’s Manufacturing PMI. Additionally, the IBD/TIPP Index is also due along with the Dallas Fed Index and the speech by FOMC’s L.Brainard (permanent voter, dovish).

What to look for around USD

The index stays depressed below the 90.00 neighbourhood amidst the noticeable absence of catalysts. Looking at the broader scenario, the negative stance on the dollar seems to prevail among market participants, as speculation of higher inflation in the medium-term now looks to have lost momentum and the US economic outperformance narrative seems almost fully priced in. Bolstering the bearish view on the buck emerges further confirmation of the Fed’s mega-accommodative stance for the foreseeable future, as per recent FOMC Minutes and Fed-speakers.

Key events in the US this week: ISM Manufacturing, final Markit’s Manufacturing PMI (Monday) – Fed’s Beige Book (Wednesday) – ADP Report, Initial Claims, ISM Non-Manufacturing (Thursday) – Nonfarm Payrolls, Factory Orders (Friday).

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 0.01% at 89.83 and faces the next contention at 89.53 (monthly low May 25) followed by 89.20 (2021 low Jan.6) and then 88.94 (monthly low March 2018). On the upside, a breakout of 90.44 (weekly high May 28) would open the door to 90.90 (weekly high May 13) and finally 91.07 (100-day SMA).

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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