USD Index: 91.50 Is the Next Target As Bond Yields Support Gains Ahead of Powell's Speech

Summary:

The USD Index remains on bid as the US Dollar continues to get demand from the movement of capital into bond yields, ahead of the Fed Chair's speech

The US Dollar Index (DXY) is trading 0.23% higher on the day after the dollar held firm on Thursday ahead of the speech by Fed Chair Jerome Powell. Powell takes the stage at an online event hosted by the Wall Street Journal, where he is expected to take questions on the state of the US economy.

Investors would be seeking for signs of concern from Powell regarding the recent sell-off in US Treasuries, and other signs in the sentiment of the Fed towards the US economy. Going into this event, the rise in US Treasuries on Thursday helped the US Dollar get some demand, and undermined low-yielding (CHF, JPY) and non-yielding assets (gold, silver).

Technical Outlook for DXY

The USD Index has violated the 90.965 resistance, after opening with a small upside gap on the day. This candle needs to close above the resistance with a 3% upside penetration to confirm the breakout, which clears the pathway for a march towards 91.50. A pitstop exists at 91.26 (7 December 2020 and 2 February 2021 highs). These levels must be cleared for 91.906 to come into the picture. Further ascent above 91.906 changes the direction of the short-term trend.

Conversely, a rejection at 91.26 or 91.50 could allow for potential rally selling, which targets 90.503 and 90.228 as the initial downside targets. The latter intersects the lower border of the ascending channel. Additional downside targets at 89.74 and 89.198 require a breakdown of the channel’s border.