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US Dollar Index advances to session lows near 98.50

  • DXY picks up extra pace and approaches 98.50.
  • Yields of the US 10-year note rebound from 1.82%.
  • NY Empire State Index dropped to 2.0 in September.

The Greenback is now picking up extra pace and moves to the 98.50 region, or daily highs, when tracked by the US Dollar Index (DXY).

US Dollar Index up on EUR selling

The optimism around the Greenback remains well and sound at the beginning of the week, motivating DXY to reverse Friday’s sharp pullback and refocus on the mid-98.00s.

The index trades on a firm footing and derives extra strength from the increasing offered bias around EUR, which is dragging EUR/USD to fresh 2-day lows in the 1.1020 region, fading at the same time the post-ECB bull run to the 1.1100 handle and beyond.

In addition, the rebound in yields of the US 10-year reference from the 1.82% region is also collaborating with the better mood around the buck.

In the US docket, the NY Empire State Index dropped to 2.0 for the month of September (from 4.8), also missing consensus for an uptick to 4.0. Looking at the broader picture, it is expected the buck to remain sidelined ahead of the key FOMC event on Wednesday.

What to look for around USD

The Greenback has come under renewed selling pressure in past sessions, motivating the index to trade closer to the key support line in the 97.70/60 region. Above this area, the immediate outlook for the buck should remain constructive and bolster a potential move to YTD peaks near 99.40. Later this week, the Fed is expected to extend its ‘mid-cycle adjustment’ and reduce the FFTR by another 25 bps, all under the pledge to ‘sustain the ongoing expansion. Markets, however, appear somewhat overconfident in the fact that the Federal Reserve will embark on a sustained reduction of interest rates, leaving the door wide open for a probable disappointment at this week’s event. Looking at the broader picture, the positive view on the Dollar is well underpinned by the solid US labour market, strong consumer confidence and spending and the auspicious pick up in consumer prices, all adding to the buck’s safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.66% at 98.51 and a breakout of 99.10 (high Sep.12) would aim for 99.37 (2019 high Sep.3) and then 99.89 (monthly high May 11 2017). On the downside, immediate support emerges at of 97.86 (monthly low Sep.13) followed by 97.80 (55-day SMA) and finally 97.17 (low Aug.23).

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