US Dollar Index unlikely to sustain significant damage beyond 91.5-92.0 support – Westpac

A more challenging narrative for the USD has been developing lately. Nonetheless, the US Dollar Index (DXY) downside is likely limited to 91.5-92.0. Meanwhile, fresh marginal highs round 94.0 are on the cards into Q4, as economists at Westpac note.

Consumer confidence is taking a notable hit due to the Delta variant

“Chair Powell delivered a cautious Jackson Hole tapering message, confidence surveys show the Delta strain is sapping US rebound momentum, while the hawkish ECB wing has been talking up tapering prospects ahead of their 9 Sep meeting. DXY is unlikely to sustain any significant damage beyond 91.50-92.0 support though.”

“Fed Governor Waller and Presidents Bullard, Rosengren and Kaplan have openly called for a September taper announcement but the ‘inner circle’ of Brainard, Clarida and Powell are not likely on board yet.” 

“Another strong payrolls in the 750K-1M range for August would restore faith in rebound momentum and breathe fresh life into September FOMC taper announcement bets. That would likely stabilise DXY, but scope for gains beyond the recent highs just shy of 94 will depend on the speed of tapering, a setback in Eurozone’s recovery path and/or further covid setbacks in China.”