US Dollar Index comes under pressure near 91.00

• DXY loses further ground and approaches the 91.00 level.
• US 10-year yields grind lower to the sub-1.60% area.
• US Initial Claims, Fedspeak next on tap in the docket.

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main competitors, adds to Wednesday’s losses and creeps lower to the vicinity of the 91.00 neighbourhood.

US Dollar Index looks capped by the 91.40/50 band

The index trades on the defensive for the second consecutive session on Thursday and gradually approaches the 91.00 mark on the back of the loss of momentum in the dollar and lower US yields.

In fact, the upside momentum in the dollar appears to have run out of steam in the proximity of 91.50 on the back of the lack of traction in US yields and following comments by Fed-speakers.

Indeed, Boston Fed E.Rosengren talked down the likeliness of trimming the current bond purchases at the time when he deemed as temporary the pick-up in inflation. In the same line, Cleveland Fed L.Mester favoured the current accommodative stance in order to support a broad economic recovery, which should be reflected in an improvement in the labour market.

In the US data space, usual weekly Claims are due seconded in relevance by Challenger Job Cuts, Nonfarm Productivity and Unit Labour Costs.

In addition, NY Fed J.Williams (permanent voter, centrist), Atlanta Fed R.Bostic (voter, centrist) and Cleveland Fed (2022 voter, centrist) are all due to speak later in the NA session.

What to look for around USD

The index met a tough resistance in the 91.40/50 band for the time being and triggered a move lower amidst the resurgence of some selling bias. The optimism surrounding the dollar was sustained by the imminent full re-opening of the US economy, 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: Initial Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate (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 0.10% at 91.17 and faces immediate contention at 90.42 (monthly low Apr.29) followed by 89.68 (monthly low Feb.25) and then 89.20 (2021 low Jan.6). On the upside, a breakout of 91.43 (weekly/monthly high May 5) would open the door to 91.76 (50-day SMA) and finally 91.93 (200-day SMA).