USD Index (DXY) Marches Towards 93.00 As Strong Fundamentals Back the Greenback

The USD Index continues its advance this Thursday as it ascends towards 4-month highs. Boosting the index are the following factors:

a) Two central bankers are bullish about the US economy’s growth trajectory.

b) The lowest initial jobless claims figures in the pandemic era.

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c) Generalized risk aversion in the markets and flight to the safe-haven USD.

Two central banks have offered their outlook on the US economy. Richmond Reserve Bank President Thomas Barkin was quoted by Reuters on Thursday as saying that the Fed could see “substantial further progress” in jobs and inflation goals, with “strong demand mean inflation.” Vice-Chairman of the Fed Richard Clarisa also said that the expected inflation pathway was “consistent” with the apex bank’s new framework and that inflation could hit 2% in 2022 or 2023.

The USD Index also found joy from a drop below 700K for initial jobless claims. The actual figure of 684K was much less than last week’s figure of 781K, which was an upward revision. 

Europe’s coronavirus situation also spooked the markets in the London session, leading to safe-haven plays that have boosted the greenback despite a drop in 10-year bond yields. 

The DXY is up 0.33% on the day. 

Technical Levels to Watch

Price is now testing the 92.803 resistance. If the index can uncap this level, we could have a push towards 93.172 (11 November 2020 highs). 93.805 and 94.620 are additional targets to the north. 

On the flip side, a decline from the current level leaves the DXY below the 93.00 mark, and could initiate a return to 92.50 in a bearish retest. A decline below this area brings in 91.906 into the equation, with 91.50 and 91.261 staying within the horizon as potential targets to the south.

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USD Index (DXY) Daily Chart

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