US Dollar Index struggles to justify Treasury yield rebound below 92.00
- DXY portrays hesitant recovery even as US Treasury yields consolidate Monday’s losses.
- Market sentiment dwindles amid covid woes, mixed Fedspeak ahead of US NFP.
- Light calendar keeps traders at bay, quarter-end positioning adds to the filters.
US dollar index (DXY) edges higher 91.92, up 0.05% intraday, amid early Tuesday. The greenback gauge versus six major currencies marked the heaviest daily gains the previous day while the latest trading seems to take clues from US Treasury yields’ recovery moves.
US 10-year Treasury yield adds one basis point (bp) around 1.48% after posting the biggest daily losses since June 18. The firmer bond yields weigh on the stock futures and portray cautious optimism amid a subdued market session.
Behind the moves are the latest coronavirus (COVID-19) woes and chatters over US President Joe Biden’s infrastructure spending. Also affecting the market sentiment are the pre-NFP cautions and the quarter-end positioning.
Australia announces wider, as well as more, covid-led restrictions whereas the UK marked the highest infections since January 30. Countries in Indonesia, Malaysia and Thailand are also concerned about the latest jump in the COVID-19 figures as well as the virus strain.
On the other hand, a pullback in the Dallas Fed manufacturing index, to 31.1 versus 36.8 expected and 34.9 prior, backed the cautiously optimistic Fedspeak. That said, Thomas Barkin, President of the Richmond Federal Reserve Bank, said on Monday, "The Fed has had substantial further progress against the inflation goal". Alternatively, Federal Reserve's Vice Chairman for Supervision Randal Quarles said Supply chain imbalances leading to higher inflation are expected to remain temporary.
It’s worth noting that ECB policymaker Robert Holzmann’s comments suggesting no room for monetary policy adjustments also strengthened the US dollar the previous day.
Looking forward, a light calendar keeps risk catalysts on the driver’s seat and hence Fedspeak, as well as covid news, should be observed for fresh impulse.
Technical analysis
A 12-day-old ascending trend line joins 10-day SMA, near 91.75, to keep buyers hopeful.