US Dollar Index looks depressed near 92.70 ahead of key data

• DXY trades well below the 93.00 mark post-Powell.
• US 10-year yields remain on the rise and near 0.78%.
• PCE, Consumer Sentiment next of note in the US calendar.

The greenback is suffering the return of the selling pressure and is forcing the US Dollar Index (DXY) to recede further to the 92.60 area on Friday.

US Dollar Index offered, looks to data

The index is fading Thursday’s gains following quite a volatile session in response to markets’ reaction to Chief Powell’s (virtual) speech at the Jackson Holy Symposium and the new stance from the Federal Reserve.

It is worth recalling that the Fed will now allow inflation to run past its 2% goal “for some time”, therefore allowing consumer prices to run at an average 2% over the business cycle. The Fed, however, did not provide further details on how it will plan to achieve this new policy.

Later in the session, inflation figures tracked by the PCE (the Fed’s preferred gauge) are due seconded by trade balance results, the Chicago PMI and the final reading of the Consumer Sentiment for the current month.

What to look for around USD

The index trades on a choppy fashion so far this week, although it lost some momentum following Jackson Hole and is now re-shifting its focus to the downside and below the 93.00 neighbourhood. In the meantime, and looking at the broader picture, investors remain bearish on the dollar against the backdrop of a (more?) dovish Fed, the unremitting progress of the coronavirus pandemic, political uncertainty and the massive stimulus package, whereas occasional bouts of US-China tensions could lend some temporary legs to the greenback.

US Dollar Index relevant levels

At the moment, the index is losing 0.38% at 92.64 and faces the next support at 92.13 (2020 low Aug.18) seconded by 91.92 (23.6% Fibo of the 2017-2018 drop) and then 91.80 (monthly low May 2018). On the flip side, a break above 93.47 (weekly high Aug.21) would aim for 93.99 (monthly high Aug.3) and finally 94.20 (38.2% Fibo of the 2017-2018 drop).