US Dollar bulls attempted to extend the DXY Index rebound off multi-year lows on Monday. The US Dollar strengthened a bit further against the Euro and Yen even though the ten-year Treasury yield fluctuated little between 1.40-1.45% during the session. This was offset by gains across commodity currencies with USD/CAD declining 94-pips and AUD/USD advancing 66-pips. On balance, the broader DXY Index notched a modest 0.2% rise to trade near the 91.00-price level.

DXY – US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (02 OCT 2020 TO 01 MAR 2021)

Chart by @RichDvorakFX created using TradingView

US Dollar strength over the last few trading sessions has corresponded with a bullish MACD crossover and upswing in the relative strength index. The latest stretch of US Dollar demand drove the DXY Index back above its 50-day simple moving average. Although, in light of the 100-day simple moving average lurking overhead, the US Dollar bears might look to soon fade the rally. This potential area of technical resistance around the 91.00-handle could keep a lid on the Greenback – particularly if US interest rate differentials turn less attractive as the bond selloff stagnates.

USD PRICE OUTLOOK – US DOLLAR IMPLIED VOLATILITY TRADING RANGES (OVERNIGHT)

Shifting focus to US Dollar implied volatility readings we see AUD/USD price action is expected to be the most active during Tuesday’s trading session. This is judging by AUD/USD overnight implied volatility of 14.7%, which is above its 20-day average reading of 9.7% and ranks in the top 78th percentile of measurements taken over the last 12-months.

Potential for elevated AUD/USD price volatility likely stems from high-impact event risk surrounding the Reserve Bank of Australia interest rate decision due 02 March at 03:30 GMT. Though the RBA decision is widely expected to reflect no change in monetary policy, forward guidance from RBA Governor Lowe on the central bank’s bond-buying program could impact the Australian Dollar and AUD/USD price action materially.