- The index approaches the key barrier at 98.00 the figure.
- Yields of the US 10-year note in sub-2.25% levels.
- MBA Mortgage Applications, 2y-7y auctions, API report next on tap.
The greenback is looking to extend the positive start of the week today, challenging the key barrier at 98.00 the figure when tracked by the US Dollar Index (DXY).
US Dollar Index looks to yields, trade
The index managed to advance to the boundaries of the 98.00 mark following auspicious prints in the US docket and a better mood around the greenback, although a breakout of this critical level still remains elusive.
In fact, the up move in DXY has been sustained on Tuesday after the US Consumer Confidence climbed to 134.1 for the month of May according to the Conference Board, surpassing initial estimates.
The upside momentum in the buck comes in tandem with an important drop in yields of the US 10-year note to the sub-2.25% region, area last visited in September 2017.
Today’s US docket is far from relevant, as MBA Mortgage Approvals are only due, seconded by the weekly report on US crude oil inventories by the American Petroleum Institute and auctions of 2-year and 7-year notes.
What to look for around USD
The greenback has managed well to leave behind poor prints from the docket during last week, which have reignited concerns that a technical recession could develop at some point in 2020. In the meantime, US-China trade negotiations remain mired in the mud and there is no solution on the horizon, at least in the near term. On another direction, the FOMC minutes reinforced the ‘patient’ stance from the Federal Reserve and the ‘transitory’ lack of upside momentum in domestic inflation. In addition, the Committee ruled out rate cuts in the next months and left the door open for extra tightening if the economy evolves as planned. That said, dips in DXY should remain somewhat shallow in combination with overseas weakness, the safe haven appeal of the buck, favourable US-G10 yield spreads and the Dollar’s status of global reserve currency.
US Dollar Index relevant levels
At the moment, the pair is receding 0.03% at 97.91 and a break below 97.55 (low May 27) would open the door for 97.31 (55-day SMA) and then 97.03 (low May 13). On the flip side, the next hurdle emerges at 97.98 (high May 28) followed by 98.37 (2019 high May 23) and finally 98.97 (78.6% Fibo of the 2017-2018 drop).
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