US dollar index drops to new lows at levels below 90.00
- DXY loses even more grip and violates the 90.00 criterion.
- The benchmark 10 year water yields in the United States are approximately 1.65%.
- Housing starts and building permits are the next to appear in the dossier.
The greenback, in terms of US dollar index (DXY), extends the bearish note below key support at 90.00 on Tuesday’s rally.
US dollar index at 3-month low
The index loses ground for the fourth consecutive session in the first half of the week and returns to levels last seen in late February in the sub-90.00 region.
The growing selling pressure on the dollar comes despite the yields on the key US 10-year note in a consolidation theme around the 1.65% area, although prevailing sentiment among investors continues to favor the risk complex.
Regarding the market chatter around the issue of inflation, Fed Vice Chairman R. Clarida reiterated on Monday that occasional episodes of rising inflation are seen as transitory, adding that the reopening the economy should be a gradual process. The Atlanta Fed’s R. Kaplan preferred that the tapping talks begin as soon as possible, while he also expects inflationary pressures to subside in 2022.
In the US data space, the center of the debate will be on the housing sector with the release of housing starts and building permits in April. Later in the NA session, the API report on crude oil inventories will close the case on Tuesday.
What to look for around USD
The index has completely dampened the rally seen in March and returned to levels below the psychological neighborhood of 90.00 despite the reluctance of US yields to fall. Looking at the larger scenario, the negative position on the currency appears to be prevalent among market participants. This view was exacerbated after the April payrolls, at the same time hurting sentiment surrounding the imminent full reopening of the US economy, which in turn is supported by continued strength in domestic fundamentals, the solid deployment vaccines and once again the resurgence. market chatter about an anticipated decline. The latter comes despite the Fed’s efforts to reduce this scenario, at least for the next few months.
Key events in the United States this week: Building permits, housing starts (Tuesday) – FOMC minutes (Wednesday) – Initial claims, Philly Fed index (Thursday) – Snapshot manufacturing PMI, existing home sales (Friday).
Prominent problems on the rear boiler: Biden’s plans to support infrastructure and families, worth nearly $ 4 trillion. US-Chinese trade conflict under the Biden administration. Reduction in speculation vs. economic recovery. American real interest rates relative to Europe. Could the US fiscal stimulus lead to overheating?
Relevant levels of the US dollar index
Now the index loses 0.36% to 89.86 and faces the next support at 89.68 (February 25 monthly low) followed by 89.20 (2021 low on January 6), then 88 , 94 (lowest monthly March 2018). In contrast, a breakout of 90.90 (May 11 weekly high) would open the door to 91.06 (100 day SMA) and finally 91.43 (May 5 weekly / monthly high).