DXY inter-markets: make USD great again?

The US Dollar Index – which measures the buck vs. its main competitors – is finally showing some signs of life after dropping to fresh multi-week lows in sub-100.00 levels.

In fact, the greenback is deriving support from the continuation of the sell off in the US money markets, which is seeing yields surging to multi-day tops. In fact, the 10-year benchmark briefly tested the area above 2.55% in early trade, recording fresh 4-week peaks, just to ease a tad soon afterwards.

While the (very) short-term outlook around the Dollar stays bearish, fundamentally on the US politics and with an eye always on Trump’s Twitter account since he took office on January 20.

In the longer run the case for a stronger currency remains pretty much intact. US fundamentals remain strong, with the Federal Reserve closer to hit its targets in both employment and inflation. In addition, the FOMC has already projected three rate hikes this year. If we add the expected boost to the economy via extra fiscal stimulus previously announced by President Trump, it may prompt a faster normalization of the monetary policy via faster rate hikes (or more hikes).

In the meantime, the perspective of DXY stays positive while above the 8-month support line, today at 97.11. The area is reinforced as well by the key 200-day sma just above 97.20. In the shorter term, the 99.80/100.00 band has proven to be quite strong support for the time being.