- DXY moves further north of 97.00.
- US 10-year yields jump above 2.13%.
- US Retail Sales surprised to the upside in June.
The upside momentum in the greenback is now gathering extra pace and extending the breakout f the key 97.00 mark when tracked by the US Dollar Index (DXY).
US Dollar Index focused on more data, Powell
The index has accelerated the upside to fresh 4-day highs near 97.40 following upbeat results from US Retail Sales. In fact, headline sales and Core sales expanded at a monthly 0.4% during last month, both prints coming in above initial estimates.
On the not-so-bright-side, Import and Export Prices contracted 0.7% MoM and 0.9% MoM, respectively. Furthermore, Industrial Production came in flat MoM in June and Manufacturing Production expanded 0.4% from a month earlier.
These results appear to be tempering some expectations of a rate cut by the Fed at its meeting later in the month, at least speculations of a 50 bps rate cut. It is worth recalling that market participants have already priced in a 25 bps rate cut, also known as ‘insurance cut’.
Later in the day, the NAHB index, Business Inventories and TIC Flows are all due.
In addition, Dallas Fed R.Kaplan will speak at NABE Conference in Washington, Chief J.Powell speaks on ‘Aspects of Monetary Policy in the Post-Crisis Era’ in Paris and Chicago Fed C.Evans (voter, dovish) will speak in Chicago.
What to look for around USD
DXY has recovered some composure after once again testing the vicinity of the 200-day SMA in the 96.70 region on Friday, all in response to the dovish message from Chief Powell and the FOMC minutes. Speculations among investors have already priced in a 25 bps rate cut hits month, although a bigger rate cut is not utterly ruled out just yet. Trade tensions and global growth concerns continue to cloud the US outlook while the lack of upside traction in inflation remains worrisome. Confronting this scenario, the greenback still looks underpinned by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals when compared to its G10 peers and the shift to a more accommodative stance from the rest of the central banks.
US Dollar Index relevant levels
At the moment, the pair is gaining 0.40% at 97.31 and faces the next resistance at 97.59 (high Jul.9) followed by 97.80 (monthly high Jun.3) and finally 98.37 (2019 high May 23). On the flip side, a break below 96.73 (200-day SMA) would aim for 96.46 (low Jun.7) and then 96.04 (50% Fibo of the 2017-2018 drop).
Share
