The US dollar is that the strongest major currency thus far this month, boosted by surging yields
As my colleague Joe Perry noted in his Week Ahead report, it’ll be a busy week for US lawmakers, with Congress trying to discuss votes on a $3.5T welfare spending package, a $1.2T infrastructure bill, and an agreement to boost the debt ceiling before a possible partial government shutdown on Thursday. For the uninitiated, here may be a quick breakdown of where each bill stands as of writing:
The $1.2T infrastructure bill has already passed the Senate with help from Republicans, and Nancy Pelosi, the Speaker of the House, is optimistic that it’ll undergo the House of Representatives in the week .
The $3.5T social and environmental spending bill remains controversial, with Republicans and more centrist Democrats balking at the large tag – negotiations thereon front are likely to continue, with the headline sticker price potentially working its way lower because the two sides seek a compromise.
Both parties recognize the tremendous cost of shutting down the govt during a worldwide health crisis, so most analysts expect a minimum of a short-term agreement to stay the proverbial lights on before Thursday’s deadline.
Not surprisingly, given the close correlation between 2-year bond yield and currency values, the US dollar is that the strongest major currency thus far this month. After retracing to its 100-day EMA to start out September, the US dollar index is once more on the verge of breaking out above previous resistance within the 93.20-50 zone to its highest level thus far this year:
A confirmed break above 93.50 could open the door for a continuation toward the Q4 2020 highs for the dollar index within the mid-94.00s next. Meanwhile, even a pullback from this resistance area would go away the bulls on top of things on a medium-term basis unless the dollar index drops below its 100-day EMA within the 92.30 area.