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  • The index recedes from earlier tops in the mid-96.00s.
  • US 10-year yields rebound from lows and retake 2.88% area.
  • Turkey remains in centre stage as risk aversion persists.

The greenback, in terms of the US Dollar Index (DXY), has lost some upside momentum although the 96.20/15 band emerged as interim support for the time being.

US Dollar off 2018 highs

After clinching fresh 13-month tops in the 96.50 region, the index sparked a correction lower to the 96.20 area after some (perceived as) positive announcements from the Turkish central bank (CBRT).

In fact, the CBRT will now fulfill the banks’ liquidity needs at 19.25% instead of the 17.75% previous, a measure that is considered part of extra tightening by the central bank. The move by the CBRT removed some selling sentiment off the EM FX space, mitigating at the same time the upside momentum in the safe haven universe.

Looking at the broader picture, the buck remains well underpinned by the robust sentiment in the global markets, prospects of two more rate hikes by the Federal Reserve (likely at the September and December meetings) and the US-China trade spat.

US Dollar relevant levels

As of writing the index is losing 0.15% at 96.15 facing the next down barrier at 95.34 (10-day SMA) seconded by 94.99 (21-day SMA) and finally 94.08 (low Jul.26). On the upside, a breakout of 96.52 (2018 high Aug.13) would aim for 97.87 (61.8% Fibo of the 2017-2018 drop) and then 99.89 (high May 5 2017).