US Dollar Index stays firm, records new 2021 highs

DXY moves to 93.50, new YTD peaks, on Thursday.
The FOMC Minutes left the door open to QE tapering.
Claims, Philly Fed Index, CB’s Leading Index next in the calendar.

Pablo Piovano FXStreet

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main rivals, reaches new 2021 highs around 92.50 in the second half of the week.

US Dollar Index looks to data

The index trades in the positive territory since Monday and manages to clinch fresh highs in the mid-93.0os, area las visited in November 2020.

Persistent risk aversion, higher volatility (as per Wednesday’s uptick in the VIX index) and rising speculations of QE tapering sooner than initially anticipated (in light of Wednesday’s FOMC Minutes) all weigh on the risk complex and sustain further the upside momentum in the buck.

In addition, St. Louis Fed J.Bullard (2022 voter, dovish) advocated for QE tapering to end early in 2022 while adding that he sees interest rate hikes to start in Q4 2022.

In the US data space, usual weekly Claims are due seconded by the Philly Fed Index and the Leading Index measured by the Conference Board.

What to look for around USD

The dollar trades in fresh tops vs. its peers following the publication of the FOMC Minutes on Wednesday, where the Committee acknowledged that the QE tapering is closer than previously expected and the “sustained further progress” in the labour market still needs to be met in spite of the persistent economic recovery. Further support for the buck comes in the form of fresh coronavirus concerns, high inflation and the soft note in the risk complex.

Key events in the US this week: Initial Claims, Philly Fed Index, CB Leading Index (Thursday).

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. Debt ceiling debate. Potential hint at the timing of QE tapering at the Jackson Hole Symposium. Geopolitical risks stemming from Afghanistan.

US Dollar Index relevant levels

Now, the index is gaining 0.29% at 93.42 and a break above 93.50 (2021 high Aug.19) would open the door to 94.00 (round level) and then 94.30 (monthly high Nov.4 2020). On the flip side, the next support is located at 92.47 (low Aug.13) followed by 92.31 (50-day SMA) and finally 91.78 (monthly low Jul.30).

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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