- DXY tests lows in the 96.80/75 band.
- Trump to consider further tariffs at the G20.
- FOMC’s Kaplan said the US could suffer global deceleration.
The greenback, in terms of the US Dollar Index (DXY), has fully reversed initial gains and tested the lower bound of the recent range around 96.80, coincident with 3-month lows.
US Dollar Index offered on trade concerns, ECB
The index has resumed the downside momentum today following renewed effervescence on the US-China trade front, particularly after President Trump (of course) said he will consider extra tariffs on Chinese products after the G20 meeting.
Also adding to USD weakness, FOMC’s R.Kaplan said deceleration in overseas economic growth could impact on the US economy, adding that the creation of jobs will need to moderate in response to the already tight labour market.
Still in the US docket, weekly Claims rose by 218K, Nonfarm Productivity rose less than expected 3.4% inter-quarter in Q1 and the trade deficit shrunk a tad to $50.8 billion during April.
What to look for around USD
The greenback is suffering markets’ perception of a potential rate cut by the Federal Reserve in light of the persistent decline of US yields, increasing trade tensions, the inversion of the 3M-10Y yield curve and dovish Fedspeak. In the meantime, trade fears have moved from US-China to US-Mexico following recent Trump’s threats, all adding to the idea that a global slowdown is in the offing. However, the Fed remains patient for the time being, closely watching critical upcoming data releases.
US Dollar Index relevant levels
At the moment, the pair is losing 0.25% at 97.06 and a drop below 96.75 (low Jun.5) would open the door for 96.46 (200-day SMA) and then 95.82 (low Feb.28). On the upside, the next hurdle emerges at 97.39 (55-day SMA) seconded by 98.28 (high May 30) and finally 98.37 (2019 high May 23).
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