- DXY loses further traction and drops to lows near 90.50.
- US 10-year yields look steady around the 1.65% area.
- Retail Sales, flash Consumer Sentiment next of relevance in the docket.
The upside momentum in the greenback loses further traction and drags the US Dollar Index (DXY) to new 2-day lows in the 90.50 region at the end of the week.
US Dollar Index looks to data, yields
The index gives away further gains and recedes to new 2-day lows following the rejection from the vicinity of the 91.00 hurdle on Thursday, while the mild downside in US yields also collaborates with the move.
Indeed, once market participants have digested the higher-than-expected inflation figures during April (published on Wednesday), the sentiment around the dollar looks somewhat deflated, allowing some recovery in the risk complex.
In the Fedspeak universe, FOMC’s Waller said on Thursday that he expects inflation to run above the Fed’s goal in the next couple of years and return to the 2% target in 2023. He also expects the Fed to keep the accommodative stance for “some time”. Additionally, T.Barkin from the Richmond Fed emphasized the outperformance of the US economy vs. its peers on the back of improved consumer confidence and a “booming” housing sector.
Interesting day in the US data space, where Retail Sales will take centre stage seconded by the preliminary reading of the Consumer Sentiment for the month of May. In addition, Industrial Production figures are due seconded by Manufacturing Production, Capacity Utilization and Business Inventories.
What to look for around USD
The upside momentum in the index run out of steam just below the 91.00 hurdle earlier in the week. Recent bouts of risk aversion plus higher inflation figures lent some much-needed oxygen to the dollar, although the negative stance on the currency appears to dominate the broader scenario in the longer run. This view has been exacerbated following April’s NFP, hurting at the same time the sentiment surrounding the imminent full re-opening of the US economy, which is in turn sustained by the unabated strength in domestic fundamentals, the solid vaccine rollout and once again the resurgence of the market chatter regarding an anticipated tapering. The latter comes in despite Fed’s efforts to talk down this scenario, at least for the next months.
Key events in the US this week: Retail Sales, Industrial Production, flash May Consumer Sentiment (Friday).
Eminent issues on the back boiler: Biden’s plans to support infrastructure and families worth nearly $4 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?
US Dollar Index relevant levels
Now, the index is losing 0.17% at 90.56 and faces the next support at 89.98 (monthly low May 11) followed by 89.68 (monthly low Feb.25) and then 89.20 (2021 low Jan.6). On the other hand, a breakout of 90.90 (weekly high May 11) would open the door to 91.07 (100-day SMA) and finally 91.43 (weekly/monthly high May 5).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.