US Dollar Index clings to gains around 97.50 ahead of data

  • The index adds to recent gains in the mid-97.00s.
  • Yields of the US 10-year note climb above 2.11%.
  • NY Empire State Index next of relevance in the docket.

The greenback keeps the positive note at the beginning of the week and is now looking to move further north of the 97.50 level when gauged by the US Dollar Index (DXY).

US Dollar Index looks to data, trade

The index is challenging multi-day highs in the 97.50/60 band on Monday, always on the back of unabated concerns on the US-China trade front and speculations of a down move on rates by the Federal Reserve in the not-so-distant future.

The greenback regained attention during last week following the resurgence of a strong selling presence in EUR and GBP, while auspicious results from Retail Sales and Industrial Production offset somewhat poor prints from advanced Consumer Sentiment and U-Mich 5-year Inflation Expectations.

In the US data space today, the most relevant publications will be the manufacturing gauge by the NY Empire State index, seconded by the NAHB Index and TIC Flows.

What to look for around USD

Markets participants continue to price in the likelihood of rate cuts by the Fed in the next months and this is somehow limiting upside potential in the index. While an ‘insurance cut’ looks likely sooner than later according to market chatter, the upcoming FOMC meeting should shed more light on to the issue and is expected to give further details on the impact of trade tensions on the US economy. However, and in spite of some disappointing results in US fundamentals as of late, the labour market remains strong, wage growth keep pushing higher and the overall economy looks healthy – specially when we consider the weakness in overseas economies – all begging the question whether current speculations of rate cuts are not overdone.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.07% at 97.52 and faces the next hurdle at 97.58 (high Jun.14) seconded by 97.87 (61.8% Fibo of the 2017-2018 drop) and finally 97.71 (high Mar.7). On the downside, a breakdown of 97.02 (100-day SMA) would aim for 96.53 (200-day SMA) and then 96.46 (low Jun.7).

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