US Dollar Index struggles for direction around 93.00


  • DXY looks for direction around the 93.00 mark.
  • US 10-year yields creep higher to the 1.27% area.
  • New Home Sales, Richmond Fed Index due later in the US docket.

The dollar trades within a narrow range around the 93.00 zone when tracked by the US Dollar Index (DXY) on turnround Tuesday.

US Dollar Index met support near 93.00

The index attempts to consolidate in the lower end of the weekly range following the moderate selloff to the 93.00 neighbourhood recorded at the beginning of the week.

The renewed weakness in the dollar comes after DXY printed new 2021 highs in the 93.70 – levels last seen back in November 2020 – at the end of last week.

Positioning plus increasing cautiousness ahead of the Jackson Hole Symposium seems to be weighing on the buck amidst steady yields and lack of traction in volatility (as measured by the VIX index).

In the docket, Monday’s flash PMI prints came in below estimates although they remain well into the expansionary territory. Data wise on Tuesday, New Home Sales are due seconded by the Richmond Fed Index and the weekly report on US crude oil inventories by the API.

What to look for around USD

After recording new 2021 highs in the 93.70 region last Friday, the dollar sparked a corrective downside that met decent contention around 93.00 for the time being. The constructive performance of the dollar, in the meantime, has been further reinforced following the publication of the FOMC Minutes, 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, higher real yields and the soft note in the risk complex.

Key events in the US this week: New Home Sales (Tuesday) – Durable Goods Orders (Wednesday) – Flash Q2 GDP, Initial Claims (Thursday) – Jackson Hole Symposium, PCE, Personal Income/Spending, Advanced Goods Trade Balance, Final Consumer Sentiment (Friday).

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 002% at 92.99 and a break above 93.72 (2021 high Aug.20) would open the door to 94.00 (round level) and then 94.30 (monthly high Nov.4 2020). On the other hand, the next support comes in at 92.47 (low Aug.13) followed by 91.78 (monthly low Jul.30) and finally 91.31 (200-day SMA).

 

 

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