US Dollar Index struggles for direction around 92.00
- DXY so far manages well to keep business around 92.00.
- US Consumer Confidence surprised to the upside in June.
- MBA Mortgage Applications, ADP report, housing data next on tap.
The greenback, in terms of the US Dollar Index (DXY), alternate gains with losses around the 92.00 neighbourhood so far on Wednesday.
US Dollar Index now looks to data
The greenback finally managed to regain the 92.00 yardstick on Tuesday, although it closed the session below that level, as investors continue to adjust to quarter-end flows.
Positive results from the June’s Consumer Confidence tracked by the Conference Board and higher house prices added to the US strong economic rebound narrative and supported the ongoing view of higher inflation.
No news from the bond markets, where yields of the key US 10-year note extend the multi-session side-lined theme around the 1.50% for the time being, always amidst rising cautiousness ahead of key US data releases later in the week.
In the US data space, weekly Mortgage Applications by MBA are due in the first turn seconded by the ADP report for the month of June, the Chicago PMI, Pending Home Sales and the EIA’s report on US crude oil supplies.
What to look for around USD
The regains the 92.00 neighbourhood while remains well supported by the key 200-day SMA. The likeliness that the tapering talk could kick in before anyone had anticipated and a potential rate hike in H2 2022 fuelled the sharp bounce in the buck post-FOMC event to levels last seen in mid-April and at the same time introduced some uncertainty into the debate surrounding the extension of the “transient” inflation. The strong upside in DXY was also supported by higher yields in the shorter end of the curve, which in turn widened the spread differential vs. their German peers. In the meantime, further progress on the reopening of the economy, the vaccine rollout and results from key fundamentals remain key for the dollar’s price action/sentiment in the short-term horizon.
Key events in the US this week: MBA Mortgage Applications, ADP Report, Pending Home Sales (Wednesday) – Initial Claim, ISM Manufacturing PMI, Markit’s June final Manufacturing PMI (Thursday) – Nonfarm Payrolls, Unemployment Rate, Balance of Trade, Factory Orders (Friday).
Eminent issues on the back boiler: Biden’s plans to support infrastructure and families, worth nearly $6 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?
US Dollar Index relevant levels
Now, the index is gaining 0.01% at 92.08 and a breakout of 92.40 (monthly high Jun.18) would open the door to 92.46 (23.6% Fibo level of the 2020-2021 drop) and finally 93.43 (2021 high Mar.21). On the downside, initial contention emerges at 91.51 (weekly low Jun.23) followed by 91.16 (100-day SMA) and finally 89.53 (monthly low May 25).