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US Dollar Index resumes the upside and approaches 93.00


23 July 2021

The index manages to advance for the second session in a row and regains some upside traction at the end of the week. Indeed, the dollar rebounds from Thursday’s post-ECB lows in the proximity of 92.50 and approaches the key 93.00 mark despite the move lower in US yields and alternating risk appetite trends.

Indeed, US 10-year yields keep trading in the sub-1.30% area, while inflows into the risk-associated universe appear mitigated as of late. Later in the NA session, Markit will publish its estimates for the Manufacturing and Services PMIs for the month of July in what will be the only release in the US calendar on Friday.

What to look for around USD

DXY approaches the key 93.00 yardstick following the ECB-induced drop to the mid-92.00s in past hours. The latest positive move in the index was mainly sustained by the resumption of the risk aversion in response to the re-emergence of coronavirus concerns. The constructive stance in the dollar, in the meantime, remains propped up by the solid pace of the economic recovery, higher-than-expected inflation figures and rising rumours of rate hikes/QE tapering earlier than anticipated.

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 0.09% at 92.91 and a breakout of 93.43 (2021 high Mar.21) would open the door to 94.00 (round level) and finally 94.30 (monthly high Nov.4). On the other hand, the next down barrier lines up at 92.46 (23.6% Fibo of the November-January rally) followed by 92.00 (monthly low Jul.6) and then 91.51 (weekly low Jun.23).

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