- The index trades in the upper end of the range near 96.80.
- Yields of the US 10-year reference return to the 2.01% area.
- Fedspeak will be in the limelight. US docket is empty.
The greenback, in terms of the US Dollar Index (DXY), manages to remain in the area of multi-day highs around 96.80 on Tuesday.
US Dollar Index focused on trade, Fedspeak
The index moved to new 2-week highs at the beginning of the week, charting the largest single day advance since March following the US-China trade truce over the weekend at the G-20 event.
Higher yields and an auspicious print from the ISM manufacturing for the month of May have also added to the change of heart in the sentiment around the greenback on Monday, pushing DXY back above the critical 200-day SMA in the 96.60 region.
Yesterday, FOMC’s R.Clarida reiterated the case for looser monetary policy in the near term remains on the cards, adding that the Committee will favour policies to sustain the economic expansion, strong labour market and price stability.
Later in the day, New York Fed J.Williams (permanent voter, centrist) will speak on Global Economic and Policy Outlook and Cleveland Fed L.Mester (2020 voter, hawkish) speaks on Economy in London, all in an otherwise empty US calendar.
What to look for around USD
The ongoing risk-on mood in the global markets in response to the US-China trade truce appears to have trimmed speculations of a potential rate cut by the Fed at this month’s meeting, lending extra legs to USD. This view is also reinforced by recent speeches by Chief Powell and FOMC’s Bullard. The case, however, of lower rates in the near/medium term remains well in place for the time being, while the Fed is expected to keep the data-dependent stance intact and continue to scrutinize the US-China trade situation and uncertainty in global growth.
US Dollar Index relevant levels
At the moment, the pair is losing 0.03% at 96.78 and faces the next hurdle at 96.88 (high Jul.2) seconded by 97.08 (100-day SMA) and finally 97.77 (high Jun.18). On the other hand, a breach of 96.61 (200-day SMA) would aim for 95.82 (low Feb.28) and then 95.74 (low Mar.20).
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