- The index trades with small gains around the 98.00 handle.
- Yields of the US 10-year note remain depressed near 2.23%.
- US-China trade concerns keep ruling the global sentiment.
Tracked by the US Dollar Index (DXY), the greenback is extending the weekly recovery to the 98.00 neighbourhood amidst a moderate bias towards the risk-off trade.
US Dollar Index focused on trade, risk trends
The index is gathering extra steam beyond 98.00 the figure against the backdrop of rising risk-aversion. In fact, the S&P 500 is navigating the area of 2-month lows around 2,780 pts, as markets’ sentiment keep looking to heightened US-China trade effervescence for direction.
Yields in the US money markets, in the meantime, are intensifying the move lower today. In fact, yields of the 10-year benchmark are now trading around the 2.22% zone, levels last seen in September 2017.
In the US data sphere, the Richmond Manufacturing Index came in at 5 for the month of May, below initial estimates.
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 gaining 0.14% at 98.09 and faces the next hurdle at 98.37 (2019 high May 23) followed by 99.49 (high May 11 2017) and then 100.49 (78.6% Fibo of the 2017-2018 drop). On the downside, a drop below 97.55 (low May 27) would open the door for 97.31 (55-day SMA) and then 97.03 (low May 13).
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