US Dollar Index struggles for direction above 93.00

The greenback keeps the inconclusive price action above the 93.00 mark when tracked by the US Dollar Index (DXY) on Wednesday.

US Dollar Index eases from YTD peaks near 93.50

The index met quite a decent resistance near 93.50 earlier in the session, levels last visited back in November 2020 amidst month-end flows, profit taking mood and a moderate bias towards the risk-associated assets.

The downside in the dollar, however, is expected to be corrective only, as US yields keep the firm note despite trading off recent lows in the proximity of the 1.80% level on Tuesday.

In the US docket, the ADP report showed the US private sector added 517K jobs in March, a tad below consensus albeit markedly higher than February’s revised 176K. These results add to the already high optimism ahead of the publication of Friday’s Nonfarm Payrolls.

Later in the session, the Chicago PMI is due followed by February’s Pending Home Sales and the usual EIA’s report on US crude oil inventories.

What to look for around USD

The upside momentum in the dollar looks well and sound and the index continue to consolidate the recent breakout of the 93.00 barrier, or new YTD tops. Supporting this idea, the recent breakout of the 200-day SMA seems to bolster the now constructive view on the buck, at least in the near-term. In addition, the recently approved fiscal stimulus package adds to the ongoing outperformance of the US economy narrative as well as the investors’ perception of higher inflation in the next months, all morphing into extra oxygen for the buck. However, the mega-accommodative stance from the Fed (until “substantial further progress” in inflation and employment is made) and hopes of a strong global economic recovery (now postponed to later in the year) remain a source of support for the risk complex and carry the potential to curtail the upside momentum in the dollar in the longer run.

Key events in the US this week: ADP Report, President Biden’s speech (Wednesday) – Initial Claims, ISM Manufacturing (Thursday) – Nonfarm Payrolls (Friday).

Eminent issues on the back boiler: Biden’s new stimulus bill worth around $3 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? Future of the Republican party post-Trump acquittal.

US Dollar Index relevant levels

At the moment, the index is losing 0.05% at 93.25 and faces the next support at 92.50 (200-day SMA) followed by 91.30 (weekly low Mar.18) and then 91.22 (50-day SMA). On the upside, a break above 93.43 (2021 high Mar.31) would expose 94.00 (round level) and finally 94.30 (monthly high Nov.4).