US Dollar Index remains depressed near 92.30 post-data

• DXY remains depressed and dropped to the 92.20 level.
• US Core PCE rose 0.3% MoM and 1.3% YoY in July.
• Final August’s Consumer Sentiment coming up next.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main rivals, remains on the defensive and dropped to weekly lows around 92.20.

US Dollar Index offered post-Powell

The index is sharply lower at the beginning of the week, as investors continue to dump the dollar following the recent speech by Fed’s Powell and the new stance from the central bank regarding inflation, which is seen exacerbating the “lower for longer” stance on interest rates.

Around the FOMC, Philly Fed P.Harker (voter, hawkish) said in an interview that the recovery in the labour market lacks direction and sees pre-crisis levels returning after quite a while. He also added that the Fed’s new policy is focused on the velocity of inflation rather that the overall level.

In the US data universe, inflation figures measured by the PCE (the Fed’s preferred gauge) rose 0.3% MoM in July and 1.0% over the last twelve months. Core prices rose 0.3% inter-month and 1.3% from a year earlier. Additional data showed Personal Income expanding 0.4% during the last month and Personal Spending expanding 1.9% on a monthly basis. Furthermore, trade balance results showed the deficit widened to $79.32 billion also in July.

Closing the weekly calendar will be the final print of the Consumer Sentiment for the month of August.

What to look for around USD

The index trades on a choppy fashion so far this week, although it lost some momentum following Jackson Hole and is now re-shifting its focus to the downside and below the 93.00 neighbourhood. In the meantime, and looking at the broader picture, investors remain bearish on the dollar against the backdrop of a (more?) dovish Fed, the unremitting progress of the coronavirus pandemic, political uncertainty and the massive stimulus package, whereas occasional bouts of US-China tensions could lend some temporary legs to the greenback.

US Dollar Index relevant levels

At the moment, the index is losing 0.61% at 92.43 and faces the next support at 92.20 (weekly low Aug.28) seconded by 92.13 (2020 low Aug.18) and then 91.92 (23.6% Fibo of the 2017-2018 drop). On the flip side, a break above 93.47 (weekly high Aug.21) would aim for 93.99 (monthly high Aug.3) and finally 94.20 (38.2% Fibo of the 2017-2018 drop).