US Dollar Index starts the week offered around 92.00, looks to data

• DXY gives away part of Friday’s gains and returns to the 92.00 area.
• US 10-year yields move higher and approach the 1.25% level.
• ISM Manufacturing, final Markit’s Manufacturing PMI next of note.

The greenback sheds part of last Friday’s advance and returns to the 92.00 neighbourhood when tracked by the US Dollar Index (DXY) at the beginning of the week.

US Dollar Index focused on key data

The index partially fades Friday’s gains and challenge the key support around 92.00 on the back of the moderate improvement in the risk complex despite Chinese manufacturing data eased further during July.

The move down in DXY comes in spite of the mild advance in yields of the key US 10-year note, which creep higher and trade closer to the 1.25% yardstick so far.

Later in the NA session, the ISM Manufacturing will take centre stage seconded by the final print of the Manufacturing PMI measured by Markit.

What to look for around USD

DXY recorded fresh 4-week lows near 91.80 las Friday and closed the week with important losses following two consecutive weekly advances. The dollar’s selloff forced the index to break below the 92.00 yardstick after the Committee talked down the probability of QE tapering in the near term despite the upbeat, albeit so far insufficient, progress of the US economy. A clearer direction in the price action around the buck is now expected to emerge after the post-FOMC dust settles. In the meantime, bouts of risk aversion in response to coronavirus concerns, the solid pace of the economic recovery, high inflation and prospects of earlier-than-expected QE tapering/rate hikes should remain key factors supporting the dollar.

Key events in the US this week: ISM Manufacturing, final Markit Manufacturing PMI (Monday) – Factory Orders (Tuesday) – ISM Non-Manufacturing, ADP report, MBA Mortgage Applications (Wednesday) – Initial Claims, Balance of Trade (Thursday) – Nonfarm Payrolls, Unemployment Rate (Friday).

Eminent issues on the back boiler: Biden’s multi-billion plan to support infrastructure and families. US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. US real interest rates vs. Europe. Debt ceiling debate. Potential hint at QE tapering at the Jackson Hole Symposium.

US Dollar Index relevant levels

Now, the index is losing 0.09% at 92.00 and faces the next support at 91.78 (monthly low Jul.30) followed by 91.51 (weekly low Jun.23) and then 91.33 (200-day SMA). On the upside, a break above 92.50 (20-day SMA) would open the door to 93.19 (monthly high Jul.21) and finally 93.43 (2021 high Mar.21).