US Dollar Index challenges daily lows near 98.70

• DXY comes under further downside pressure near 98.70.
• Yields of the US 10-year note climb to 1.54%.
• Markets’ attention remain on CPI, FOMC, Powell

The Greenback has now left behind its initial gains and receded to the 98.70 region when gauged by the US Dollar Index (DXY).

US Dollar Index focused on data, trade

The index is now losing ground for the fifth consecutive session on the back of the continuation of the buying interest around Dollar’s rivals such as EUR and GBP.

DXY has quickly reversed the earlier move to the vicinity of the 99.00 handle despite the rebound in yields of the US 10-year reference to the 1.55% region and the wider spread differential vs. their European peers.

Moving forward, investors are expected to closely follow the trade developments from the upcoming US-China trade talks on Thursday and Friday in Washington, while the Greenback should stay in centre stage this week in light of the publication of September’s CPI figures and the FOMC minutes.

What to look for around USD

The Greenback came under further selling pressure during last week, motivating DXY to extend the rejection from 2019 highs near 99.70 recorded on October 1^st. Renewed recession jitters and Fed easing chatter kept weighing on the buck after the awful prints from the ISM gauges and the mixed employment report for the month of September. In the very near term, investors’ focus will be on the FOMC minutes (Wednesday) and US-China trade talks (Thursday and Friday). Despite evidence that the US economy could be losing some momentum, the labour market remains strong as well as consumer spending, while the recent pick up in inflation adds to the auspicious domestic scenario vs. the generalized slowdown in most of overseas economies. On the broader view, the constructive outlook in DXY looks a bit damaged but it still is in play amidst a divided FOMC vs. a broad-based dovish stance from the rest of the G-10 central banks. In addition, the positive view on USD remains well sustained by its safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is losing 0.03% at 98.81 and faces the next support at 98.67 (21-day SMA) seconded by 98.28 (55-day SMA) and finally 97.86 (monthly low Sep.13). On the upside, a breakout of 99.67 (yearly high Oct.1) would aim for 99.89 (monthly high May 11 2017) and then 100.00 (psychological handle).