Dollar Index rests above 200-week MA, T-yields recover from 6-week lows

• The dollar index (DXY) is flat lined above 200-week moving average (MA) of 94.85 in Asia.
• Treasury yields recovery from 6-week lows.

Currently, the dollar index (DXY) is trading in a sideways manner above 94.85 (200-week MA), having clocked a high of 95.03 yesterday despite the drop in the treasury yields to six-week lows.

The EUR/USD (biggest component of DXY) fell sharply to 1.1510 (lowest level since July 20) on Tuesday on fears that fresh elections in Italy would deliver a stronger mandate to anti-EU parties.  

Hence, the DXY posted gains even though the US 10-year treasury yield and the 2-year treasury yield fell to a 6-week low of 2.76 percent and 2.32 percent, respectively. Moreover, the treasury prices rose as Italian political uncertainty boosted haven demand.

As of writing, the 10-year yield is trading at 2.81 percent – up 5 basis points from the previous day’s low of 2.76 percent. The recovery could be an indication the risk-off moves may have run out of steam and so the EUR/USD could witness a corrective rally. Thus, rising Treasury yields may end up pushing the greenback lower.

Dollar Index Technical Levels

The resistance is seen at 95.15 (Nov. 7 high), 95.47 (June 30 low), 96.33 (June 14 low). Meanwhile, support is lined up at 94.27 (Oct. 6 high), 94.22 (Dec. 12 high), and 94.06 (10-day MA).