US Dollar Index tracks Treasury yields to consolidate losses around 92.50
- DXY rebounds after posting the biggest daily loss in a week.
- 30-year bond auction, firmer Euro on ECB weighed on the greenback.
- Cautious optimism, quiet session underpins the latest consolidation.
- US PPI, risk catalysts are likely to direct short-term moves.
US Dollar Index (DXY) picks up bids to refresh intraday high around 92.53, up 0.03% on a day, during early Friday. The greenback gauge dropped the most in a week the previous day while snapping a three-day uptrend.
The DXY rebound seems to follow the US Treasury yields as the bond bears seem to retake controls amid cautious optimism. The mood seems to have taken clues from US President Joe Biden’s six-pronged strategy announcement. Also positive could be the UK’s approval of the covid vaccine’s booster shots for usage. Additionally, Fed hawks keep tapering tantrum alive and back the USD.
It should be noted that the record high covid infections in Australia’s biggest state New South Wales (NSW), population-wise, as well as China’s recent uptick in the infections, also favor the US dollar’s safe-haven demand. Additionally, chatters that Australia may terminate the agreement with China on a 99-year lease on the Port of Darwin, spread by the Australian Financial Review (AFR), also favor the greenback.
Amid these plays, S&P 500 Futures remain directionless around 4,490 while stocks in Asia-Pacific trade are mixed by the press time.
That said, a dismal reaction to the 30-year bond auction, with 1.91% yield versus 2.04% prior, dragged down the US dollar the previous day, even as the coronavirus woes and tapering concerns tried to put a floor under the moves. On the same line, the 10-year Treasury yields dropped over four basis points (bps) to 1.29%.
Looking forward, US Producer Price Index (PPI) data for August, expected 0.6% MoM versus 1.0% prior, will be important to watch for intermediate direction. However, the ECB’s passage and an absence of major data/events can keep market players directed towards the risk catalysts for fresh impulse.
Technical analysis
DXY bulls remain hopeful unless breaking 200-DMA support near 92.18.