US Dollar Index resumes the upside and retakes 94.00

  • DXY manages to regain some upside traction on Tuesday.
  • US 10-year yields look side-lined just below the 1.50% yardstick.
  • ISM Non-Manufacturing, trade balance figures, Fedspeak next on tap.

The greenback met some dip buyers and now pushes the US Dollar Index (DXY) back to the 94.00 region.

US Dollar Index looks to data and yields

After three consecutive daily pullbacks, the index now looks bid and trades closer to the key barrier at 94.00 the figure on turnaround Tuesday.

The recovery in the dollar comes on the back of the side-lined mood in US yields, with the short end of the curve hovering around 0.28% and the belly navigating below 1.50% for the time being.

In the meantime, investors continue to monitor the developments coming from the ongoing discussions on whether the debt ceiling should be raised or suspended. It is worth recalling that the federal government could run out of money by October 18, as per recent warnings by Treasury Secretary J.Yellen.

In the US calendar, the salient event will be the publication of the ISM Non-Manufacturing, final Services PMI gauged by Markit, trade balance figures, the IBD/TIPP Index and the speech by FOMC’s R.Quarles (permanent voter, centrist).

What to look for around USD

The index dropped to as low as the 93.70 region at the beginning of the week, where some decent contention seems to have turned up. Profit taking mood, moderate recovery in the risk complex in light of the strong dollar gains witnessed in past sessions and a soft note in US yields have all collaborated with the renewed downside in the buck in past sessions. The dollar, in the meantime, remains underpinned by markets’ adjustment to prospects for a “soon” start of the tapering process, probable rate hikes at some point during next year and the rising view of a more lasting high inflation. Positive results from US fundamentals coupled with alleviating concerns regarding the progress of the Delta variant should also add to the constructive view of the dollar in the near/medium term.

Key events in the US this week: ISM Non-Manufacturing (Tuesday) – ADP report (Wednesday) – Initial Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Wholesale Inventories (Friday).

Eminent issues on the back boiler: Biden’s multi-billion Build Back Better plan. US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. Debt ceiling debate. Geopolitical risks stemming from Afghanistan.

US Dollar Index relevant levels

Now, the index is gaining 0.16% at 93.95 and a break above 94.50 (2021 high Sep.30) would open the door to 94.74 (monthly high Sep.25 2020) and then 95.00 (round level). On the flip side, the next down barrier emerges at 93.67 (weekly low Oct.4) followed by 93.27 (20-day SMA) and finally 92.98 (weekly low Sep.23).

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