- The strong advance in the DXY Index lost momentum around 92.80.
- Powell’s semi-annual testimony will be the center of attention later in the day.
- US producer prices and the Fed’s beige book stand out on today’s economic calendar.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, corrects down to the region of 92.70 on Wednesday.
US dollar DXY index focuses attention on Powell
After two consecutive daily advances, the DXY index has run out of strength in the region of 92.80 / 85 early in the session.
Despite the current decline in the DXY index, the Prospects for the dollar remain positive, particularly after the release of inflation figures on Tuesday measured by the CPI much stronger than expected. It should be recalled that the general CPI rose by 5.4% year-on-year in June, the highest level since 2008. The core CPI increased by 4.5% year-on-year, levels last seen in 1991.
Furthermore, recent speeches by the Fed have favored an earlier reduction in the bond buying program coupled with speculation of a rate hike by the end of 2022. The rally in 10-year US yields also underpinned the dollar’s bullish momentum.
During today’s American session, the first testimony of the Fed Chairman, Jerome Powell, before Congress on the semiannual Monetary Policy Report will be the center of attention.
When it comes to US data, MBA mortgage applications, producer prices, the weekly EIA report on crude inventories and the Fed’s Beige Book will be released today.
What can we expect around the USD?
The rally in the DXY index flirted with monthly highs near 92.80 on Wednesday following improved sentiment around the dollar. The positive stance in the index seems justified by higher-than-expected inflation figures, the economic recovery and speculation of rate hikes ahead of schedule.
Key events in the US this week: Powell Semi-Annual Testimony, PPI Producer Prices, Fed Beige Book (Wednesday) – Initial Jobless Claims, Powell Semi-Annual Testimony, Philadelphia Fed Index, Industrial Production (Thursday) – Retail Sales, Preliminary Consumer Sentiment for July (Friday).
Eminent Background Topics: Biden’s bill to support infrastructure and families. Trade conflict between the United States and China under the Biden administration. Reduction of speculation in the face of economic recovery. Real US interest rates versus Europe. Could US fiscal stimulus cause overheating?
Relevant levels of the US dollar DXY index
At the time of writing, the DXY index is down 0.10% on the day, trading at 92.68. Next support is at 91.51 (June 23 low), followed by 91.38 (200-day SMA) and 89.53 (May 25 low). On the other hand, a breakout of 92.84 (July 7 high) would open the door to 93.00 (round level) and finally 93.43 (March 21 high).
.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
