- DXY trades within a tight range around 97.60.
- US 10-year yields briefly tested sub-2.10% levels.
- US ISM manufacturing next of relevance.
The greenback keeps looking for a clear direction at the beginning of the week, with the US Dollar Index (DXY) meandering a narrow 20 pip range around 97.60 for the time being.
US Dollar Index now looks to data
The index alternates gains with losses in the lower end of the recent range on Monday following Friday’s sharp pullback.
The renewed and strong selling bias in the buck has been sparked in response to (premature?) rising fears over the likeliness that the Federal Reserve could cut rates in the medium term. In fact, the persistent inversion of the 3M-10Y yield curve has motivated investors to shift their focus to a potential change in the direction of the Fed’s policy.
Later in the NA session, the key ISM manufacturing for the month of May should keep the focus of attention on the Dollar.
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 losing 0.06% at 97.55 and 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). On the other hand, the next hurdle emerges at 97.88 (10-day SMA) seconded by 98.37 (2019 high May 23) and then 99.49 (high May 11 2017).
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