US dollar DXY index rises to new highs above 91.40 ahead of data

• The DXY index extends the recovery to the 91.40 region on Wednesday.
• US 10-year yields are back at 1.60% after recent lows.
• The US ADP report will focus investors’ attention at the start of the American session.

The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, extends the positive sentiment and reaches new highs in the region of 91.40 / 45 at the start of the European session on Wednesday.

DXY US Dollar Index rises on higher yields and focuses on US data.

The DXY index moves higher for the second day in a row on Wednesday and extends positive momentum after bottoming out at monthly lows around 90.40 on April 29.

Key US 10-year benchmark yields rise back to the 1.60% region so far and offer more support for the dollar, while Tuesday’s comments from former Fed chair Janet Yellen, who suggested higher rates to prevent the economy from overheating, also contribute the optimistic sentiment in the currency.

At the start of the American session, the focus will be on the ADP report for the month of April followed by the release of the ISM non-manufacturing PMI. Additionally, Chicago Fed Governor C. Evans, Boston Fed Governor E. Rosengren, and Cleveland Fed Governor L. Mester are due to speak during the day.

What can we expect around the USD?

The DXY index continues to climb after falling to April lows in the 90.40 region (April 29) and with the recent bounce above the 91.00 hurdle. The optimism around the dollar is supported by the impending full reopening of the US economy, the relentless strength of national fundamentals, the strong launch of the vaccination campaign and the resurgence of market rumors regarding an adjustment. on the Fed buying bonds earlier than expected. The latter occurs despite the Fed’s efforts to lower this scenario, at least for the next few months.

Key events in the US this week: ADP Report, ISM Non-Manufacturing PMI (Wednesday) – Initial Unemployment Claims (Thursday) – NFP Non-Farm Payrolls, Unemployment Rate (Friday).

Eminent Background Issues: Biden’s bill to boost infrastructure worth about $ 3 trillion. 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 gaining 0.13% on the day, trading at 91.40. A breakout of 91.74 (50-day SMA), would open the door to 91.94 (200-day SMA) and finally 92.46 (23.6% Fibonacci retracement of the 2020-2021 dip). On the other hand, the next support is at 90.42 (April 29 low), followed by 89.68 (February 25 low) and 89.20 (January 6 low).