The US dollar index (DXY) rose slightly on Monday as US Government bond yields retreated. The index is trading at $91.80, which is 0.50% above last week’s low of $91.35.
US Treasury yields retreat
The US dollar index is reacting to the US Treasury yields. The yield of the ten-year government bond has declined by 0.50% to 1.627% while that of the 30-year declined by 0.70% to 2.38%. The two yields are still close to the highest levels since last year as investors anticipate higher inflation.
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Last week, data by the Bureau of Labour Statistics (BLS) showed that the headline consumer price index (CPI) rose from 1.4% in January to 1.7% in February. This performance was in line with expectations. On Friday, data revealed that the producer price index (PPI) increased by 1.3%, the biggest increase since 2009. This performance was mostly due to the rising crude oil prices.
Rising US bond yields are a sign that investors believe that inflation will keep rising because of higher oil prices and the recently-passed $1.9 trillion stimulus package. The five-year breakeven rate, a popular metric, shows that investors are pricing in a 2.5% inflation rate.
Meanwhile, the dollar index is rising ahead of the important US retail sales numbers that will come out tomorrow. Economists believe that the overall sales declined from 5.3% in January to -0.5% in February. They also expect that core sales declined by 0.1% as the impact of the previous $900 billion stimulus package started to erode.
Most importantly, the currency is rising ahead of the important Federal Reserve meeting that will start tomorrow. The bank is expected to leave interest rates and quantitative easing policies unchanged. Still, this meeting will offer Jerome Powell and other members an opportunity to deliberate on the performance of the bond market.
The US dollar has risen by 0.75% against the Swedish krona, 0.15% against the Japanese yen, and by 0.25% against the euro.
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US dollar index forecast
The dollar index rose to an intraday high of $91.80. On the four-hour chart, the price is slightly below the 23.6% Fibonacci retracement level. It is also between the first and second support of the Andrews Pitchfork tool. Also, it has moved above the middle line of the Bollinger Bands. Therefore, the pair may continue rising as bulls target the next key resistance at $92. You can learn more about this indicator in our free forex trading course.
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