US Dollar Index comes under pressure and retest 92.00
- The index recedes from yearly highs and return to 92.00.
- Lower US yields weigh on the dollar and drag DXY lower.
- NFIB Index, API report are next on the US docket.
The upside momentum in the greenback appears somewhat dented and drag the US Dollar Index (DXY) back to the 92.00 neighbourhood.
US Dollar Index looks to yields
The index comes under pressure following earlier tops in the 92.50 region on turnaround Tuesday. In fact, the corrective downside in US yields force the dollar to shed ground and revisit the 92.00 zone.
Furthermore, yields of the key US 10-year reference navigate around 1.53% after climbing to levels last seen over a year ago beyond 1.62% last Friday, morphing into renewed selling pressure in the buck.
In the meantime, the reflation/stimulus/vaccine trade continues to favour the greenback and reinforce the narrative of the US economy outperformance vs. its G10 peers.
Later in the US calendar, the NFIB Index will be the sole release seconded by the weekly report on US crude oil inventories by the API.
What to look for around USD
The overall sentiment in the dollar remains firm and pushed the index to new YTD highs in the mid-92.00s on Tuesday. The recent change of heart in the buck came in tandem with the strong bounce in US yields to levels recorded over a year ago, all against the backdrop of rising investors’ perception of higher inflation in the next months. However, a sustainable move higher in DXY should be taken with a pinch of salt amidst the mega-accommodative stance from the Fed (until “substantial further progress” is seen), extra fiscal stimulus and hopes of a strong economic recovery overseas.
Key events in the US this week: Inflation figures measured by the CPI (Wednesday) – Initial Claims (Thursday) – Flash February Consumer Sentiment (Friday).
Eminent issues on the back boiler: 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 gaining 0.23% at 92.19 and a breakout of 92.46 (23.6% Fibo of the 2020-2021 drop) would expose 92.91 (200-day SMA) and finally 94.30 (monthly high Nov.4). On the other hand, the next support emerges at 91.21 (100-day SMA) seconded by 91.05 (high Feb.17) and then 90.51 (50-day SMA).