- DXY moves lower and tests the 96.70 region.
- Yields of the US 10-year reference threaten the 2.0% handle.
- FOMC’s Mester due to speak later. US docket is empty.
Measured by the US Dollar Index (DXY), the greenback is fading part of the earlier spike to the 96.80 region – or weekly highs – and keeps navigating the lower end of the daily range in the 96.70/60 band.
US Dollar Index failed ahead of 97.00
The index met an important resistance in the boundaries of 96.90 during the first half of the week following the important breakout of the 96.60 region, where coincide the key 200-day SMA and the multi-month line (now support).
The absence of data releases in the US docket leaves the buck to focus on the broader risk appetite trends while market participants continue to digest the recently clinched trade truce between the US and China at the G-20 gathering.
Further out, the greenback is deriving some selling impetus from the decline in yields of the key US 10-year reference, which continue to put the 2.0% mark under pressure.
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.
Moving forward, it will be an interesting week for the buck data-wise, as the ADP report is due tomorrow along with Factory Orders, May’s Trade Balance figures and the ISM Non-manufacturing, all ahead of Friday’s Non-farm Payrolls.
Later in the day, Cleveland Fed L.Mester (2020 voter, hawkish) will speak on Economy in London.
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 0.10% at 96.71 and a breach of 96.61 (200-day SMA) would aim for 95.82 (low Feb.28) and then 95.74 (low Mar.20). on the other hand, the next up barrier lines up at 96.88 (monthly high Jul.2) seconded by 97.08 (100-day SMA) and finally 97.77 (high Jun.18).
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