• DXY looks to add to Wednesday’s gains in the 90.40 region.
  • Focus remains on yields and US politics on Thursday.
  • Chief Powell, more Fedspeak and Initial Claims of note in the docket.

The greenback, when tracked by the US Dollar Index (DXY), struggles for a clearer direction around the 90.40 region on Thursday.

US Dollar Index stays capped by 90.70

The index manages well to keep business above the 90.00 mark so far in the second half of the week.

In fact, the dollar keeps the bid bias unchanged and looks to add to Wednesday’s gains always on the back of renewed speculations of a potential Fed’s tapering at some point by year-end (as per recent Fedspeak)

In addition, the recent pick-up in US yields – particularly in the 10-year benchmark – continues to lend oxygen to the buck and supports the recovery in DXY, which is so far limited by the 90.70/75 band (recorded on Monday).

In the docket, the usual weekly Claims will take centre stage ahead of the participation of Fed’s Powell in a livestream event. Additionally, Atlanta Fed R.Bostic (voter, centrist) and Dallas Fed R.Kaplan (2023 voter, hawkish) are due to speak later in the session.

What to look for around USD

The index regained buying interest after bottoming out in the 89.20 area in the first trading week of the new year and managed to advance to the proximity of 90.70 earlier this week, where some relevant resistance turned up. The recovery in US yields keeps lending support to the greenback as investors continue to perceive a potential pick-up in inflation pressure/expectations in response to the most likely increment in fiscal stimulus under a Democrat White House. However, the outlook for the greenback remains fragile in the short/medium-term for the time being amidst massive monetary/fiscal stimulus in the US economy, the “lower for longer” stance from the Federal Reserve and prospects of a strong recovery in the global economy.

US Dollar Index relevant levels

At the moment, the index is losing 0.03% at 90.32 and faces immediate contention at 89.20 (2021 low Jan.6) followed by 88.94 (monthly low March 2018) and the 88.25 (monthly low February 2018). On the other hand, a breakout of 90.72 (2021 high Jan.11) would open the door to 91.01 (weekly high Dec.21) and finally 91.23 (weekly high Dec.7).