US DOLLAR PROSPECTS: DXY INDEX EYES EMPLOYMENT DATA, INFLATION RISK
- The strength of the US dollar sent wider DXY Index retracement almost 0.4% higher on Tuesday
- The US dollar has made a bet thanks to the demand for asylum as risk appetite has soured
- Immediate Resistance Looms Above USD Bulls Amid Premature Fed Cutting Talks
The US dollar as a whole recovered its lost ground on Tuesday, with the DXY rising about 0.4% to offset losses from the previous session. The strength of the US dollar was seen across the board major currency pairs and is most noticeable in the dynamics of the AUD / USD price. Beyond the general risk aversion and corresponding demand for safe haven currencies such as the U.S. dollar, fears of not-so-transient inflation seem to have heightened and fueled conversation about when The federal reserve can begin to normalize politics.
DXY – USD INDEX PRICE CHART: DAILY FRAMEWORK (DECEMBER 24, 2020 TO MAY 4, 2021)
Schedule by @RichDvorakFX created using TradingView
After mentioning that the Fed may have to raise rates to prevent the US economy from overheating early Tuesday morning, Treasury Secretary Janet Yellen dropped her comments later in the session. The former FOMC chairman clarified that she does not believe inflation will be a problem and does not forecast or recommend a rate hike, adding that interest rates are expected to remain low in the future. Not to mention, if the Fed’s contraction and uncontrolled inflation were perceived by the markets as a real threat, it’s hard to imagine that 10-year Treasury yields would still hover around 160 basis points.
This allows us to focus on the potential of the US dollar and the broader DXY to tackle technical issues. resistance the 91.40 price level, which is underpinned by mid-March swing lows and a 20-day simple negative slope. moving average… However, if the US dollar bulls overcome this technical barrier and return to the 50-day simple moving average, the DXY could expand to its upper limit. Bollinger Band… Renewed selling pressure on the US dollar could bring trend support in focus around 90.50.
FORECAST DOLLAR PRICE – IMPLIED US $ TRADING RANGE (NIGHT)
However, the price action of the US dollar appears to accelerate during the Wednesday trading session. Judging by the last night implied volatility indications for selected currency pairs US dollar. Looking at DailyFX Economic CalendarWe see little risk of high-impact events, although several Fed officials are scheduled to speak, which could add a bit of color to growing inflation concerns and speculation to curtail speculation. In addition, ADP employment data is due tomorrow and often serves as a precursor to the monthly nonfarm payrolls report due Friday.
– Written Rich Dvorak, Analyst DailyFX.com
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