US Dollar Index eases some ground, approaches 94.00
- DXY gives away part of the recent gains and looks to 94.00.
- US 10-year yields appear consolidative above 1.50%.
- Challenger Job Cuts, weekly Claims next in the docket.
The greenback fades part of Wednesday’s advance to the area of YTD highs and now approaches the 94.00 support when gauged by the US Dollar Index (DXY).
US Dollar Index focuses on data
The index trades on the defensive and reverses two consecutive daily builds, including a move to the vicinity of the YTD highs around 94.50 on Wednesday.
The corrective move in the buck comes in response to some loss of upside momentum in 10-y USTs despite the short end of the curve pushes higher to the 0.30%. Still in the bonds market, the perception of higher inflation pushed yields in TIPS to fresh tops, although losing some vigour afterwards.
In addition, the recent agreement between Democrats and Republicans to extend the debt limit until December seems to have quelled somewhat Wednesday’s resurgence of the risk aversion sentiment among investors.
In the docket, NY Fed J.Williams is due to speack later in the NA session, while usual weekly Claims and Challenger Job Cuts are expected to keep the attention on the labour market ahead of Friday’s critical Nonfarm Payrolls release.
What to look for around USD
The index faltered just ahead of the YTD highs around 94.50 on Wednesday. Positive news from the debt-ceiling front and the loss of upside momentum in US yield allow some respite in the risk complex and weigh on the buck on Thursday. Looking beyond the immediate term, the dollar remains underpinned by markets’ adjustment to prospects for a “soon” start of the tapering process, probable rate hikes at some point during next year and the rising view that elevated inflation could last more than initially expected. Positive results from US fundamentals coupled with alleviating concerns regarding the progress of the Delta variant should also add to the constructive view of the dollar in the near/medium term.
Key events in the US this week: Initial Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Wholesale Inventories (Friday).
Eminent issues on the back boiler: Biden’s multi-billion Build Back Better plan. US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. Debt ceiling debate. Geopolitical risks stemming from Afghanistan.
US Dollar Index relevant levels
Now, the index is losing 0.08% at 94.15 and a break above 94.50 (2021 high Sep.30) would open the door to 94.74 (monthly high Sep.25 2020) and then 95.00 (round level). On the flip side, the next down barrier emerges at 93.67 (weekly low Oct.4) followed by 93.43 (20-day SMA) and finally 92.98 (weekly low Sep.23).