US Dollar Index regains traction and climbs to 90.50

• DXY reverses the recent downtrend and reaches 90.50.
• The rally in risk complex seems to be taking a breather.
• The flash US Consumer Sentiment gauge is due later.

The greenback regains the smile at the end of the week and pushes the US Dollar Index (DXY) to the 90.50 region.

US Dollar Index looks to data

The index manages to gain some upside traction following five consecutive daily pullbacks and rebounds from recent weekly lows in the 90.30/20 band. So far, the 2020-2021 line around 90.30 emerges as a solid contention area for USD-bears.

In the meantime, investors seem to be taking profits in the risk-associated universe, lending some temporary support to the greenback. However, the reflation trade and the strong recovery in the global economy backed by the vaccine rollout are expected to keep the sentiment around the buck depressed.

Later in the NA session, the preliminary gauge of the US Consumer Sentiment tracked by the U-Mich index will take centre stage along with the speech by New York Fed J.Williams (permanent voter, centrist).

What to look for around USD

The dollar’s corrective downside appears to have met a decent support near 90.20 so far this week. Bouts of occasional strength in US yields remain the almost exclusive driver of bullish attempts in the buck helped with firm growth prospects and auspicious (and fast) vaccine rollout vs. its G10 peers. The continuation of the downtrend in the dollar looks the most likely scenario against the backdrop of the fragile outlook for the currency in the medium/longer-term, and always amidst the current massive monetary/fiscal stimulus in the US economy, the “lower for longer” stance from the Fed and prospects of a strong recovery in the global economy, which is expected to morph into extra appetite for riskier assets.

Key events this week in the US: Advanced measure of the Consumer Sentiment for the month of February (Friday).

Eminent issues on the back boiler: US-China trade conflict under the Biden’s administration. Trump’s impeachment. Tapering speculation vs. economic recovery. US real interest rates vs. Europe. Could US fiscal stimulus lead to overheating?

US Dollar Index relevant levels

At the moment, the index is gaining 0.07% at 90.48 and a breakout of 91.60 (2021 high Feb.5) would open the door to 91.66 (100-day SMA) and finally 92.46 (23.6% Fibo of the 2020-2021 drop). On the other hand, initial support is located at 90.25 (weekly low Feb.10) followed by 90.04 (weekly low Jan.21) and then 89.20 (2021 low Jan.6).