The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its competitors, regains buying interest and retakes the 92.50 area on Friday. The index partially reverses Thursday’s strong pullback and trades once again in the mid-92.00s on the back of the persistent sentiment supporting the safe haven universe and a mild pick-up in yields.
In fact, yields of the key US 10-year note, in the meantime, manage to put further distance from recent lows in the 1.25% zone, levels last recorded back in February.
Also supporting the risk-off mood, volatility tracked by the VIX (aka “the panic index”) climbed to 2-month tops beyond 21.00 on Thursday, always tracking the rapid spread of the Delta variant of the coronavirus pandemic and its potential impact on global growth prospects. In the US data space, the Fed will publish its Monetary Policy Report, while the Wholesale Inventories for the month of May will be the sole release in the calendar. On Thursday, Initial Claims rose more than expected from a week earlier, also adding extra pressure to the buck.
What to look for around USD
The recovery in DXY clinched new tops near 92.90 and the focus now shifted to the 93.00 neighbourhood ahead of YTD tops in the 93.50 zone. The FOMC Minutes did show early tapering discussions and a positive assessment of the pace of the US recovery, which kind of underpins the improved sentiment surrounding the buck. However, extra upside in the index could be mitigated, as the patient stance from the Federal Reserve seems to prevail for the time being.
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 gaining 0.07% at 92.41and 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). On the other hand, the next support emerges at 91.51 (weekly low Jun.23) followed by 91.39 (200-day SMA) and finally 89.53 (monthly low May 25).