• DXY moves within a rangebound theme in the 90.30 region.
  • Global markets’ sentiment remains tilted to the riskier assets.
  • NY Empire State Index, TIC Flows, Fedspeak next on tap.

The greenback, when tracked by the US Dollar Index (DXY), extends the consolidation range around the 90.30 area on turnaround Tuesday.

US Dollar Index remains under pressure

The index extends the recent inconclusive price action and keeps hovering around the 90.30 region in the generalized context favouring the risk complex. The demand for riskier assets, however, appears to have entered into an impasse mode, waiting for stronger catalysts.

In the meantime, the reflation/vaccine trade continues to keep the buck under pressure and undermines any serious bullish attempt for the time being. Furthermore, the dollar seems to ignore the recent rebound in yields of the key US 10-year reference to the proximity of 1.25%, levels last seen in March 2020.

Data wise in the US docket, the regional manufacturing gauge measured by the NY Empire State Index is due seconded by TIC Flows and the speech by FOMC’s M.Bowman (permanent voter, centrist).

What to look for around USD

The corrective downside in the index appears to have met a decent support near the 90.30/20 band recently. The price action in the dollar seems to have decoupled somewhat from the performance of US yields in past days, while the continuation of the downtrend in the dollar looks the most likely scenario for the time being against the backdrop of the fragile outlook for the currency in the medium/longer-term. In the meantime, the current massive monetary/fiscal stimulus in the US economy, the “lower for longer” stance from the Fed and prospects of a strong recovery in the global economy are forecast to keep any serious bullish attempts in the buck well contained.

Key events in the US this week: January’s Retail Sales, Industrial Production and the FOMC Minutes (Wednesday). Weekly Initial Claims and the Philly Fed Index are due on Thursday ahead of flash PMIs (Friday).

Eminent issues on the back boiler: 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 0.19% at 90.31 and faces initial support at 90.22 (weekly low Feb.16) followed by 90.04 (weekly low Jan.21) and then 89.20 (2021 low Jan.6). On the other hand, a breakout of 91.58 (10-day SMA) would open the door to 91.60 (2021 high Feb.5) and finally 92.46 (23.6% Fibo of the 2020-2021 drop).

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