US Dollar Index flirts with the 90.00 mark, looks to Powell

• DXY remains under mild downside pressure near 90.00.
• Chief Powell reiterated the Fed’s ultra-accommodative stance.
• Second testimony by Powell, Fedspeak, housing data next on tap.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, trades slightly into the negative territory and close to the key support at the 90.00 mark on Wednesday.

US Dollar Index appears weak post-Powell

The index looks somewhat stabilized in the lower bound of the recent range and trades at shouting distance from the psychological 90.00 support, area coincident with the key 2020-2021 support line and considered the last defence for a potential visit to the YTD lows around 89.20.

The sentiment around the dollar remains depressed amidst omnipresent stimulus talk and prospects of the strong global recovery.

In addition, Chief Powell has practically ruled out any modification of the ongoing asset-purchase programme or monetary stance in the foreseeable future at his appearance before the Congress to deliver the Semiannual Monetary Policy Report on Tuesday.

Later in the NA session, Powell will testify once again although this time before the House Financial Services Committee. In addition, FOMC’s L.Brainard (permanent voter, dovish) is due to speak, while Vice Chair R.Clarida (permanent voter, dovish) will speak on “US Monetary Outlook and Monetary Policy”.

In the data space, MBA’s Mortgage Applications, New Home Sales and the EIA’s report on crude oil supplies are all due later.

What to look for around USD

The index flirts with the key 90.00 support, as the selling bias around the dollar has accelerated as of late. In the meantime, 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 propped up by the reinforced mega-accommodative stance from the Fed, persistent chatter of extra fiscal stimulus and prospects of a strong recovery in the global economy, which are all seen underpinning the better sentiment in the risk complex.

Key events in the US this week: Second testimony by Chief Powell in Capitol Hill (Wednesday), another revision of Q4 GDP and Initial Claims (Thursday) and inflation figures gauged by the PCE and the final Consumer Sentiment measure (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 0.15% at 90.03 and faces the next support at 89.20 (2021 low Jan.6) followed by 88.94 (monthly low March 2018) and finally 88.25 (2018 low Feb.16). On the flip side, a breakout of 91.05 (weekly high Feb.17) would open the door to 91.38 (100-day SMA) and finally 91.60 (2021 high Feb.5).