US Dollar Index falters around 92.80, looks to Powell, data
- The strong advance in DXY lost momentum around 92.80.
- Powell’s semiannual testimony will take centre stage later.
- US Producer Prices, Fed’s Beige Book next on tap in the docket.
The US Dollar Index (DXY), which gauges the greenback vs. its main competitors, corrects lower to the 92.70 region on Wednesday.
US Dollar Index now looks to Powell
After two consecutive daily advances, the index run out of steam in the 92.80/85 band earlier in the session.
Despite the current knee-jerk in DXY, the prospects for the buck remain positive, particularly after Tuesday’s release of (much) stronger than expected inflation figures measured by the CPI. It is worth recalling that the headline CPI rose 5.4% YoY in June, the highest level since 2008. The Core CPI rose 4.5% YoY, levels last seen in 1991.
In addition, recent Fedspeak favouring an earlier tapering of the bond purchase programme, speculations of a rate hike by end of 2022 and the rebound in US 10-year yields also underpinned the upside momentum in the dollar.
Later in the NA session, Chief Powell’s first testimony to the Congress on the Semiannual Monetary Policy Report will take centre stage.
In the US data space, MBA Mortgage Applications, Producer Prices, the EIA’s weekly report on crude oil inventories and the Fed’s Beige Book will be in the limelight.
What to look for around USD
The recovery in DXY flirted with monthly tops near 92.80 on Wednesday on the back of the improved sentiment now surrounding the dollar. The positive stance in the index appears justified by higher-than-expected inflation figures, the economic recovery and speculations of rates hikes earlier than anticipated.
Key events in the US this week: Powell’s Semiannual testimony, producer Prices, Fed’s Beige Book (Wednesday) – Initial Claims, Powell’s Semiannual testimony, Philly Fed Index, Industrial Production (Thursday) – Retail Sales, advanced July 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. Could US fiscal stimulus lead to overheating?
US Dollar Index relevant levels
Now, the index is losing 0.10% at 92.68 and faces the next support at 91.51 (weekly low Jun.23) followed by 91.38 (200-day SMA) and finally 89.53 (monthly low May 25). On the other hand, a breakout of 92.84 (monthly high Jul.7) would open the door to 93.00 (round level) and finally 93.43 (2021 high Mar.21).