US Dollar Remains Firm Amid Fed Taper Talks

Greenback gains moderately in London on Wednesday, with investors and currency traders anticipating U.S. inflation data. Tapering of Federal Reserve assets may start earlier than expected.

When this report was drafted, the U.S. Dollar Index, which measures the strength of the dollar against six major currencies, increased by 0.04% to 93.093 index points.

A bullish dollar extends its upward momentum and surpasses 93.00, recording new 3-month tops as well.

As a result of the recent price movements, further gains are expected with an immediate target of around 93.50 price levels for the time being, the dollar’s positioning should remain constructive so long as it remains above the 200-day SMA, currently at 91.37.

As an alternative, a US Dollar Index buy can regain control if it crosses the 93.05 support confluence, a horizontal four days old line and a previous support line.

The Chicago Fed Bank’s President Charles Evans, for example, is increasingly disagreeing with Jerome Powell despite his claims that inflationary pressure is likely to be temporary. Throughout the week, other officials will speak, including Kansas City Fed Bank President Esther George.

Continually increasing COVID-19 cases worldwide are also concerning, with Australia extending the lockdown to Melbourne. COVID-19 though still very visible in many parts of the world, the possibility of news on Fed tapering has to be taken into account by investors.

Historical data suggest equity markets will soften over the next 6-12 months as yields rise on US Treasuries. In turn, this supports the greenback, since risk assets have a tendency to be weighed down by such conditions.

Since the beginning of the year, the dollar has gained against eight of its peers from the Group of-10, only underperforming the Canadian dollar and the British pound sterling.