US Dollar Index drops to 4-week lows near 92.50

• DXY loses further ground and re-visits the mid-92.00s.
• US 10-year yields bounce off recent lows and target 1.30%.
• US Consumer Confidence, housing data next on tap.

The greenback extends the corrective downside to the 92.50 area when tracked by the US Dollar Index (DXY).

US Dollar Index focuses on data

Following Monday’s inconclusive price action, the index accelerates the downside to levels last seen at the beginning of August on turnaround Tuesday.

Lower US 10-year yields collaborate with the offered bias in DXY and extend the downtrend following the cautious speech by Chief Powell at the Jackson Hole event on Friday.

In the US data space, the centre of the debate will gyrate around the Consumer Confidence print gauged by the Conference Board seconded by the FHFA’s House Price Index, the S&P/Case-Shiller Index, the Chicago PMI and the weekly report by the API on US crude oil inventories.

What to look for around USD

Powell’s cautious tone at his speech at the Jackson Hole Symposium caught USD-bulls off guard, sponsoring the ongoing corrective move in DXY to multi-week lows as a consequence. In the meantime, support for the buck is expected to come in the for of coronavirus concerns, high inflation and higher real yields, while upcoming key data releases are predicted to have a crucial role in the timing of the start of the QE tapering.

Key events in the US this week: House Price Index, CB Consumer Confidence (Tuesday) – ADP report, ISM Manufacturing (Wednesday) – Balance of Trade, Initial Claims, Factory Orders (Thursday) – Nonfarm Payrolls, ISM Non-Manufacturing (Friday).

Eminent issues on the back boiler: Biden’s multi-billion plan to support infrastructure and families. US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. US real interest rates vs. Europe. Debt ceiling debate. Geopolitical risks stemming from Afghanistan.

US Dollar Index relevant levels

Now, the index is losing 0.22% at 92.48 and faces the next down barrier at 92.00 (round level) followed by 91.78 (monthly low Jul.30) and finally 91.60 (100-day SMA). On the flip side, a break above 93.72 (2021 high Aug.20) would open the door to 94.00 (round level) and then 94.30 (monthly high Nov.4 2020).