US Dollar Index looks offered, drops below 94.00
- DXY extends the corrective downside to the sub-94.00 area.
- US 10-year yields edge mildly higher around 1.47%.
- Factory Orders, 3m/6m Bill Auctions next in the docket.
The greenback remains on the defensive and now drags the US Dollar Index (DXY) to fresh lows in the sub-94.00 region.
US Dollar Index looks to data, yields
The index loses further momentum and briefly tests the 93.90 region at the beginning of the week.
The dollar thus adds to the recent corrective move from new 2021 highs (September 30) amidst the steady activity in the US bonds markets, with yields of the 10-year benchmark note so far hovering around the 1.47% region.
In the meantime, there are no meaningful reactions in the buck after the US government managed to avert a shutdown and extend the funding until early December, therefore re-shifting the focus of attention to a discussion around the suspension/increase of the debt limit.
In the US docket, Factory Orders will be the sole release later in the NA session seconded by short-term bill auctions.
What to look for around USD
The index extends further the leg lower from recent 2021 tops around 94.50 amidst some profit taking mood, a mild recovery in the risk complex in light of the strong dollar gains witnessed in past sessions and a soft note in US yields. The dollar, in the meantime, remains underpinned by markets’ adjustment to prospects for a “soon” start of the tapering process, probable rate hikes at some point during next year and the rising view of a more lasting high inflation. Positive results from US fundamentals coupled with alleviating concerns regarding the progress of the Delta variant should also add to the constructive view of the dollar in the near/medium term.
Key events in the US this week: Factory Orders (Monday) – ISM Non-Manufacturing (Tuesday) – ADP report (Wednesday) – Initial Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Wholesale Inventories (Friday).
Eminent issues on the back boiler: Biden’s multi-billion Build Back Better plan. US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. Debt ceiling debate. Geopolitical risks stemming from Afghanistan.
US Dollar Index relevant levels
Now, the index is losing 0.07% at 94.00 and a break above 94.50 (2021 high Sep.30) would open the door to 94.74 (monthly high Sep.25 2020) and then 95.00 (round level). On the flip side, the next down barrier emerges at 93.90 (weekly low Oct.4) followed by 93.72 (weekly high Aug.20) and finally 92.86 (55-day SMA).