The US dollar index (DXY) is down for the second straight day as US bond yields continued to decline. The index is trading at $91.13, which was the lowest level since March 4.
US dollar index relentless sell-off
The US dollar has been under pressure even after recent positive strong numbers from the United States. Early this month, data by Markit and the Institute of Supply Management (ISM) showed that the manufacturing and services sector continued to fire on all cylinders in March.
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Less than two weeks ago, data by the Bureau of Labour Statistics (BLS) revealed that the American economy added almost a million jobs in March. The unemployment rate declined while the participation rate also rose.
And last week, data revealed that the number of people who filed for initial jobless claims dropped to below 600,000 for the first time since the pandemic started.
Meanwhile, data by the government showed that the US consumer inflation rose by 2.6% in March. Core consumer prices rose by 1.6%. Further, retail sales rose by double digits in March as the residents spent part of their stimulus checks.
At the same time, American corporations are doing well, as evidenced by the strong results released last week. Most companies like Blackrock, Goldman Sachs, and JP Morgan reported better-than-expected results. According to FactSet, more companies are beating their estimates by a wider margin than average.
In theory, these numbers ought to propel the dollar index higher. However, the index has declined because of the performance of the bond market and the assurances by the Federal Reserve. Today, the 10-year yield dropped by almost 1% to 1.5600%. Similarly, the 30-year yield dropped by 0.90% to 2.24%.
Analysts at most forex brokers believe that the Fed will continue with its dovish tone in a bid to drop the unemployment rate to below 4%.
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DXY technical analysis
The four-hour chart shows that the US dollar index has been in a sharp downward trend recently. It has declined to the 61.8% Fibonacci retracement level. The decline has also been supported by the 25-day and 50-day moving averages. It has also moved below the first support of the standard pivots. Therefore, the path of least resistance for the index is lower, with the next key support being at $91.