- The index looks to consolidate beyond the 98.00 mark.
- Yields of US 10-year note rebound from sub-2.20% levels.
- US Q1 GDP next of relevance in the calendar today.
The greenback is alternating gains with losses in the second half of the week, always navigating above the key 98.00 barrier when measured by the US Dollar Index (DXY).
US Dollar Index focused on data, yields, trade
The weekly recovery in the index appears to have now taken a breather just above 98.00 the figure amidst persistent concerns on the US-China trade front and a mild rebound in global yields.
In fact, yields of the US 10-year benchmark dropped to the boundaries of 2.20% on Wednesday – levels last visited in September 2017 – although they managed to bounce to the 2.26%-2.27% area during early trade.
Trade jitters gathered extra steam yesterday after China has opened the door for further retaliation, intensifying concerns over the prospects of global growth.
Later in the NA session, the focus of attention will be on the second estimate of US Q1 GDP seconded by Trade Balance figures, the usual weekly report on the labour market, Pending Home Sales and the speech by FOMC’s R.Clarida (permanent voter, dovish) at the Economic Club of New York.
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, the US-China trade dispute threatens to escalate amidst potential retaliatory measures from China and the utter lack of any progress in the negotiations. 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 0.01% at 98.14 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 97.32 (55-day SMA) and then 97.03 (low May 13).
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