The US Dollar Index has spiked sharply this Wednesday, as talk of rising inflation has sparked a jump in US bond yields to 1-year highs.
The US Dollar is up against a basket of low-yielding currencies, as effectiveness in vaccine rollouts have ramped up expectations of faster economic recovery and the possibility of rising inflation. Benchmark 10-year Treasuries are close to pre-pandemic levels, trading at 1-year highs following yesterday’s massive jump. 10-year Treasuries are up 6.78% this week, adding to the 9.18% and 4.10% gains of the previous two weeks to trade at 1.299%.
A rise in bond yields usually sparks investor demand for US Treasuries. Such investments have to be done in US Dollars, hence the rising demand for the greenback which invariably strengthens the USD and manifests as bullish candles on the USD Index charts. The DXY is trading 0.4% higher on the day as of the time of writing.
Technical Levels to Watch
The surge in the US Dollar Index has put the 90.965 resistance level at risk. A continued surge that takes out this level will bring 91.50 into focus, with 91.906 and 92.50 lining up as the next targets to the north.
On the flip side, rejection at 90.965 and a consequent pullback bring in 90.503 as the initial downside target. A further decline in the USD Index challenges 90.228, with 89.741 and 89.189 constituting new targets to the south.
USD Index Daily Chart