US Dollar Index to find solid support at the 91.50-92.00 zone – Westpac

Fed Vice Chair Clarida added heft to the growing chorus of centrist FOMC members in favour of scaling back stimulus. Dips on the US Dollar Index (DXY) are likely limited to 91.5-92.0, in the view of analysts at Westpac. There is scope for fresh highs beyond 93.50 as taper talk rises to a crescendo in Q3. 

Active calendar to underscore an economy that is continuing to normalize

“July’s emphatic payrolls gain underscores an economy that is finding its reopening groove despite ongoing reopening constraints and an expanding 4th Delta Covid wave. Next week’s business surveys, retail sales and FOMC minutes should showcase a resilient US story.”

“The Fed’s centre of gravity is shifting, doves (Evans) and centrists (VC Chair Clarida and SF President Daly) voicing support for a scaling back of stimulus. Fed officials likely continue to drop more explicit hints in coming weeks, markets likely to focus on the upcoming Jackson Hole symposium and the Sep FOMC meeting, where labour market projections are likely to be revised stronger again.” 

“DXY should continue to find support in the 91.5-92.0 area and as taper talk rises to a crescendo in Q3 could see new highs beyond 93.50.”