- DXY trades on the defensive and approaches 98.40.
- Yields of the US 10-year note failed around 1.82%.
- The FOMC cut rates by 25 bps. Powell disappoints USD-bears.
The US Dollar Index (DXY), which gauges the Greenback vs. a basket of its main competitors, is now trading on a soft note in the 98.50/45 band.
US Dollar Index upside capped near 98.80
The index keeps the familiar range above the 98.00 handle in the second half of the week after the Federal Reserve reduced the FFTR by 25 bps at its meeting on Wednesday, matching the broad consensus among investors.
The decision on rates was once again divided, with members E.George and E.Rosengren opposing lower rates and J.Bullard favouring a 50 bps rate cut. The Committee justified the decision to cut rates in the ongoing trade tensions and uncertainty around global growth.
At his press conference, Chief J.Powell did not pre-commit to extra easing in the future, although he did not rule out further interest rate cut either. In order to assess potential move on rates by the Fed at the upcoming meetings, the focus of attention remains on domestic inflation, global growth and trade developments.
In the US docket today, the Philly Fed index will likely grab all the attention ahead of the usual Initial Claims and Existing Home Sales.
What to look for around USD
DXY keeps the trade within range so far while markets digest the FOMC event and assess another rate cut under the ‘mid-cycle adjustment’. Domestic data in combination of political and trade developments should be key in determining the next decision on rates after Fed’s Powell left the door open for extra easing along the road. Looking at the broader picture, the positive view on the Dollar is still 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’. Against this backdrop, the slowdown persists in overseas economies while central banks stick to a more aggressive dovish bias.
US Dollar Index relevant levels
At the moment, the pair is losing 0.10% at 98.45 and faces immediate contention at 97.86 (monthly low Sep.13) followed by 97.59 (100-day SMA) and finally 97.17 (low Aug.23). On the upside, a break above 99.10 (high Sep.12) would aim for 99.37 (2019 high Sep.3) and then 99.89 (monthly high May 11 2017).
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