- The index fades the move to the 97.85/90 band.
- US 10-year yields rebound from multi-year lows.
- Fed’s Evans, Consumer Credit coming up next in the docket.
The US Dollar Index (DXY), which tracks the greenback vs. a basket of its main competitors, has faded the earlier spike to daily highs near 97.90 and is now hovering around the 97.60 region.
US Dollar Index now looks to lows near 97.20
The correction lower in the index has now picked up extra pace following the poor performance from US yields, which retreated to new multi-year lows in the 1.63% region.
The sharp drop in US yields is forcing USD/JPY to breach the key support at 106.00 the figure and open the door for a retest of recent lows around the 105.20 region, ahead of the flash-crash low at 104.63 recorded on January 3.
In the meantime, DXY has failed once again to surpass recent highs in the vicinity of the 97.90 region, where is located a Fibo retracement of the 2017-2018 drop and the 10-day SMA.
In the data space, Chicago Fed C.Evans will speak on the Economy, the EIA will publish its weekly report on US crude oil supplies and Consumer Credit results are coming up next.
What to look for around USD
The fresh bout of US tariffs on Chinese products has undermined the Fed-led rally in the buck to levels last seen in May 2017 near 99.00 the figure, sparking a sharp leg lower to the area just above the critical 200-day SMA. By the same token, yields of the US 10-year benchmark have dropped to multi-year lows in the sub-1.70% area, where some support appears to have emerged. In the meantime, the US-China trade war is expected to remain the almost exclusive driver of the global sentiment for the time being, although an eventual deal in the next months looks highly unlikely. Regarding the greenback, its demand appears propped up by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals and the less dovish stance from the Federal Reserve.
US Dollar Index relevant levels
At the moment, the pair is losing 0.14% at 97.45 and a breakdown of 97.21 (low Aug.6) would open the door to 96.92 (200-day SMA) and then 96.67 (low Jul.18). On the other hand, the next up barrier emerges at 97.94 (10-day SMA) followed by 98.37 (monthly high May 23) and then 98.93 (2019 high Aug.1).
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