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US Dollar Index: 200-DMA plays its role of resistance amid cautious optimism

  • DXY pulls back from two week high.
  • The US-China political tension weighs on Phase-one optimism.
  • The US Durable Goods Orders will be in the spotlight.

The US Dollar Index (DXY) declines to 97.64 ahead of the European session on Monday. The greenback gauge fails to benefit from the US President Donald Trump’s trade positive comments amid looming differences between the US and China.

US President Trump’s comments, on Saturday, increased the odds of a final signing of a phase-one deal between the US and China. However, the Republican leader’s passage of defense bill irritated China’s President Xi Jinping who warned the world’s largest economy to stay out of its internal matters concerning Taiwan, Hong Kong, etc.

Further, political pressure surrounding the US-North Korea also increased after the New York Times reported that US military & intelligence officials are tracking North Korea’s actions by the hour & bracing them for a major imminent missile test. The leaders of Japan and South Korea are in China and will discuss North Korean issues with the diplomats from Beijing.

With this, the US 10-year treasury yields a step back from Friday’s increase to 1.91% while S&P 500 Futures also fail to lure the bids.

The index surged heavily on Friday after domestic data defied calls of recession into the US. Also benefiting the trading sentiment was China’s readiness to lift some more tariffs on US agricultural products.

Traders will now look forward to the November month Durable Goods Orders, Chicago Fed National Activity Index and New Home Sales. “We expect durable goods to retreat in November at -1.2% m/m. A rebound in auto orders following the end of the GM strike was probably more than offset by a plunge in the, especially volatile aircraft component. We expect little change in both ex-transportation and core CAPEX orders. Surveys have generally been signaling stalling rather than dramatic weakening in underlying trends,” says TD Securities.

Technical Analysis

A successful daily closing beyond 200-Day Simple Moving Average (DMA) level of 97.70 will need validation from September month low near 98.00 to aim for November month top, at 98.54. Meanwhile, 97.30, 97.00 and 96.72 could lure sellers during further declines.


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