US Dollar Index kick-starts Fed week around monthly top above 93.00

  • DXY stays on the front foot amid a quiet start to the key week.
  • Tapering tantrum looms despite mixed data, covid-led economic challenges.
  • China headlines can entertain traders, off in Tokyo, Beijing questions momentum traders.

US Dollar Index (DXY) stays firmer around 93.25, the highest level since August 23, during Monday’s Asian session.

The greenback gauge remains on the front foot after a two-week uptrend amid a risk-off mood. However, the pre-Fed anxiety and a bank holiday in China, as well as Japan, restrict the DXY momentum of late.

The COVID-19 fears and chatters that the US Federal Reserve (Fed) will hint at tapering during this week’s Federal Open Market Committee (FOMC) could be cited as the key catalysts behind the DXY’s latest run-up. Additionally, escalating tensions between China and the Western allies, namely the US, Australia and the UK, also weigh on the market sentiment and underpin the US dollar.

On Friday, the preliminary readings of the US Michigan Consumer Sentiment Index for September eased below 72.20 forecast to 71.0 but stayed above 70.30 prior readouts. The same joins the previously released US Consumer Price Index (CPI) and the escalating Delta covid variant cases to challenge the Fed hawks.

However, firmer Retail Sales and factory-gate inflation data join the hopes of further stimulus to challenge the easy-money supporters. That said, Axios recently reported that US Senator Manchin delay President Joe Biden’s spending package vote to 2022. On the contrary, US House Speaker Pelosi said to expect a bipartisan approach to address the debt limit, per Reuters.

While portraying the risk-off mood, S&P 500 Futures drop 0.15% intraday by the press time.

Moving on, a light calendar at home and abroad, except for the Canadian Federal Elections, may restrict DXY moves. However, the Fed-linked chatters and the covid updates may entertain the greenback traders.

Read: Fed Preview: Three ways in which Powell could down the dollar, and none is the dot-plot

Technical analysis

US Dollar Index bulls may struggle between 93.20 and 93.45 area comprising multiple tops marked since July and April 2021 high respectively. Also challenging the buyers is the upper band of the Bollinger and sluggish Momentum line.

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