• DXY now accelerates the downside to the 90.50 area.
  • US Initial Claims disappointed estimates at 861K WoW.
  • The Philly Fed Index surprised to the upside at 23.1.

The greenback, in terms of the US Dollar Index (DXY), loses further the grip and drops to session lows near 90.50, where also coincide the 100/200-hour SMAs.

US Dollar Index weaker post-data

The selling momentum around the index picks up extra pace on Thursday after Initial Claims rose by 861K during last week, disappointing consensus. On the brighter side, the Philly Fed manufacturing gauge bettered forecasts at 23.1 in February albeit easing a tad from the January’s reading (26.5).

Mixed data from the US housing sector saw Building Permits increasing 1.881M units, or 10.4%, during last month; while Housing Starts contracted 6.0%, down to 1.580M units.

In the meantime, yields of the US 10-year reference remain on the rise and retake the 1.30% area, although the buck seems to ignore this for the time being.

Also weighing on the dollar, it is worth recalling that the FOMC Minutes noted on Wednesday that members reinforced the dovish stance from the Federal Reserve, adding that potential bouts of higher inflation are seen as temporary and defending at the same time the Fed’s pledge to achieve maximum employment.

What to look for around USD

The corrective upside in the index appears to have met a decent hurdle near the 91.00 yardstick recently, always following the renewed correlation to US yields. However, bullish attempts in the buck should remain short-lived amidst the broad-based fragile outlook for the currency in the medium/longer-term. The latter is sustained by the (reinforced) accommodative stance from the Fed, extra fiscal stimulus and prospects of a strong recovery in the global economy, which are seen underpinning the better sentiment in the risk-associated space.

Key events in the US this week: Preliminary Manufacturing/Services 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 0.39% at 90.59 and faces immediate contention 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 flip side, a breakout of 91.05 (weekly high Feb.17) would open the door to 91.53 (100-day SMA) and finally 91.60 (2021 high Feb.5).