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  • The index keeps business above the 98.00 mark so far.
  • US ADP report came in above expectations at 156K.
  • Fed expected to cut rates by 25 bps later today.

The US Dollar Index (DXY), which tracks the greenback vs. a basket of its main competitors, is holding on to the 98.00 yardstick ahead of the key FOMC event.

US Dollar Index focused on Fed, Payrolls

The index came under selling pressure after hitting fresh 2-month tops around 98.20 on Tuesday, all amidst a persistent cautious tone in light of the upcoming FOMC meeting.

In fact, investors consider a 25 bps rate cut a done deal at today’s meeting, although extra attention will be on the Fed’s statement and subsequent press conference by Chief J.Powell, where the centre of the debate will be on potential further easing in the next months and the Committee’s view on the economy.

In the US data space, the ADP report noted the US private sector added 156K jobs in July, while the Chicago PMI dropped to 44.4 for the same month.

What to look for around USD

Investors have already priced in a 25 bps interest rate cut this month, while a larger rate cut is now practically off the table following recent positive developments from US fundamentals. Trade talks are back to the fore in light of this week’s meeting in China, although significant progress in the negotiations is expected to remain absent for the time being. The demand for the greenback, in the meantime, stays underpinned by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals and the broad-based shift to a more accommodative stance from the rest of the G-10 central banks.

US Dollar Index relevant levels

At the moment, the pair is losing 0.03% at 98.04 and a breakdown of 97.63 (10-day SMA) would open the door to 96.89 (200-day SMA) and then 96.67 (low Jul.18). On the flip side, the next up barrier aligns at 98.21 (monthly high Jul.30) seconded by 98.33 (monthly high Apr.23) and finally 98.37 (2019 high May 23).