US Dollar Index tracks Treasury yields to consolidate losses near 93.00

• DXY bears take a breather after the heaviest daily loss since June, snaps two-day downtrend.
• US Treasury yields recovery amid receding chatters over tapering, vaccine optimism.
• Sino–American tension, fears emanating from Afghanistan and light calendar test the traders.

US Dollar Index (DXY) picks up bids to 93.03, up 0.06% intraday, amid Tuesday’s Asian session. The greenback gauge dropped the most in two months the previous day amid risk-on mood. However, a lack of major catalysts and mixed clues challenged the DXY bears afterward.

The DXY dropped 0.52% to a one-week low on Monday, down for the second consecutive day, as market chatters over the Fed’s tapering eased after recently downbeat US data and covid woes push policymakers to step back on their policy tightening recommendations.

The preliminary readings of August month PMIs for the US not only dropped below their consensus and prior but also took the Composite PMI to the lowest since US Dollar Index tracks Treasury yields to consolidate losses near 93.00. On Friday, Dallas Fed President Robert Kaplan signaled to step back on his tapering calls due to the Delta covid variant outbreak.

Elsewhere, the US Food & Drug Administration’s (FDA) approval to Moderna–BioNTech vaccine whereas the UK’s readiness to order 35.00 million doses of Pfizer vaccine for booster shot also portrays the vaccine optimism. Furthermore, Australia’s New South Wales (NSW), the highly infected and the key state, reports the world’s fastest jabbing.

Recently, the UK calls for an emergency videoconference of the Group of Seven (G7) leaders to discuss the Taliban-related issues around 13:30 GMT. On the same line were covid fears from Asia–Pacific and the US Securities and Exchange Commission (SEC) will increase hardships for Beijing-based companies’ listing.

Amid these plays, the US 10-year Treasury yields rise 0. 5 basis points (bps) to 1.26% while the S&P 500 Futures gain 0.17% during a light-calendar day.

Looking forward, risk catalysts remain the key while US housing data may offer second-tier catalysts to follow.

Technical analysis

Despite bouncing off an ascending trend line from August 04, around 92.95, the 10-DMA level of 93.05 challenges the DXY recovery. Also acting as a short-term upside hurdle is the previous double-top formation around 93.20. Given the receding bullish bias of MACD, US Dollar Index remains vulnerable to the further downside unless printing a daily close beyond 93.20.