- The index drops to multi-day lows around 97.60.
- Yields of the US 10-year note drop to fresh lows.
- ISM Manufacturing next of relevance in the docket.
The greenback, measured by the US Dollar Index (DXY), is looking for direction in the lower end of the recent range in the 97.60/55 band.
US Dollar Index looks to data, trade
The index has come under heavy selling pressure as of late, particularly exacerbated after President Trump has threatened to impose 25% tariffs on all imports from Mexico at the end of last week.
Further out, fears of a Fed’s rate cut in the next months continue to weigh on investors’ sentiment. In fact, the sharp drop in global yields has echoed in the US money markets, where yields of the US 10-year benchmark are now trading in fresh lows around 2.12%, levels last seen in September 2017 and well below yields of the 3-month peer, which are hovering around 2.35%.
In the data space, the ISM Manufacturing will be the salient event later today, while FOMC’s R.Quarles (permanent voter, centrist) will discuss on Libor Transition, Richmond Fed T.Barkin will speak to the Charlotte Economics Club and St. Louis Fed J.Bullard (voter, dovish) will speak in Chicago.
What to look for around USD
The greenback is suffering markets’ perception of a potential rate cut by the Federal Reserve in light of the persistent decline of US yields, which has intensified the inversion of the yield curve. In the meantime, trade fears have moved from US-China to US-Mexico following recent Trump’s threats, all adding to world concerns over a slowdown. However, the Fed remains patient and upcoming data from the manufacturing sector, inflation and labour market should prove to be crucial for investors’ prospects of a change in the direction of the Fed’s policy.
US Dollar Index relevant levels
At the moment, the pair is gaining 0.06% at 97.66 and faces the next hurdle at 97.88 (10-day SMA) seconded by 98.37 (2019 high May 23) and then 99.49 (high May 11 2017). On the downside, a drop below 97.55 (low May 27) would open the door for 97.38 (55-day SMA) and then 97.03 (low May 13).
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