• DXY reverses Wednesday’s uptick and resumes the downside.
  • US10-year yields consolidate below the 1.70% level so far.
  • US Initial Claims, Powell’s speech next in the docket.

The greenback, in terms of the US Dollar Index (DXY), returns to the negative territory around the 92.30 region in the second half of the week.

US Dollar Index looks to data, yields

The index quickly fades Wednesday’s uptick and resumes the downside in the lower end of the recent range and closer to the key support at the 92.00 yardstick.

The loss of upside traction in US yields as of late, particularly the 10-year reference, seems to have undermined the recent bull run in the dollar.

In addition, the US economic recovery narrative looks somewhat exhausted and priced-in by investors, which now appear to have shifted their focus to Europe and the improvement in the vaccine rollout.

Nothing new from the release of the FOMC Minutes on Wednesday, where the Committee reiterated the absence of any rush to modify the current monetary conditions, adding that the ongoing pandemic stands as a continues source of uncertainty. In addition, members deem inflation risks as balances while the improved US growth outlook was the main reason behind the move higher in US yields.

Later in the US data space, the usual weekly Claims will take centre stage seconded by the participation of Chairman Powell at a discussion panel on “The Global Economy” at the International Monetary Fund Debate on the Global Economy.

What to look for around USD

The upside momentum in the dollar faltered ahead of the 93.50 region in past sessions, sparking a corrective downside to the vicinity of the 92.00 region. The greenback now looks under some downside pressure, as the US reflation trade and the idea of higher inflation in the next months lost some vigour. Furthermore, the mega-accommodative stance from the Fed (until “substantial further progress” in inflation and employment is made) and hopes of a strong global economic recovery (now postponed to later in the year) remain a source of support for the risk complex and carry the potential to curtail the upside momentum in the dollar in the second half of the year.

Key events in the US this week: initial Claims, Powell’s speech (Thursday) – Producer Prices (Friday).

Eminent issues on the back boiler: Biden’s new stimulus bill worth around $3 trillion. 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? Future of the Republican party post-Trump acquittal.

US Dollar Index relevant levels

At the moment, the index is losing 0.14% at 92.29 and faces the next contention at 92.13 (weekly low Apr.7) followed by 91.49 (50-day SMA) and then 91.30 (weekly low Mar.18). On the other hand, a break above 93.43 (2021 high Mar.31) would expose 94.00 (round level) and finally 94.30 (monthly high Nov.4).