US Dollar Index breaks below 98.00, FOMC on sight
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US Dollar Index breaks below 98.00, FOMC on sight

  • The index is now correcting lower and drops to 97.90.
  • Yields of the US 10-year note tumble to lows near 2.4%.
  • Markets’ focus remains on the FOMC minutes.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, has now turned negative for the day below the critical 98.00 the figure.

US Dollar Index offered ahead of FOMC

The index is fading part of yesterday’s fresh multi-day peaks beyond 98.10 in tandem with a moderate drop in yields of the US 10-year benchmark, which are now challenging the 2.40% area.

In the meantime, the US-China trade dispute remains the top driver of the price action and mood in the global markets. Latest news on this front cited US Treasury Secretary S.Mnuchin ruling out a visit to Beijing to continue trade talks.

Moving forward, it will be the turn of the FOMC and its minutes, with the US economy and domestic inflation on top of the agenda. In addition, NY Fed J.Williams (permanent voter, centrist) will host an Economic Press Briefing and Atlanta Fed R.Bostic (2021 voter, centrist) will make Opening Remarks at the Dallas Fed Conference.

What to look for around USD

With the US-China trade talks mired in the mud for the time being, investors’ attention have now shifted to the Chinese government and the likeliness of intervention in the Yuan, as the currency slowly approaches the psychological 7.00 mark without any progress in the negotiations, at least in the short-term horizon. On another direction, inflation figures remain in the centre of the debate among Fed members despite the solid labour market and healthy fundamentals, preventing the Fed from fully ruling out a rate hike later in the year. The positive outlook on the buck, however, stays unchanged and sustained by overseas weakness, its safe haven appeal, favourable yield spreads vs. the Fed’s G10 peers and the status of global reserve currency.

US Dollar Index relevant levels

At the moment, the pair is losing 0.04% at 97.98 and a break below 97.70 (21-day SMA) would open the door for 97.25 (55-day SMA) and then 97.03 (low May 13). On the upside, the next up barrier emerges at 98.13 (high May 21) seconded by 98.32 (2019 high Apr.25) and finally 98.97 (78.6% Fibo of the 2017-2018 drop).

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