US Dollar Index clings to gains around 98.60, looks to ECB, CPI

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  • DXY is looking to add to Wednesday’s strong advance.
  • Yields of the US 10-year note approach the 1.80% level.
  • US CPI, Claims next of relevance on the docket.

The Greenback, in terms of the US Dollar Index (DXY), is looking to consolidate Wednesday’s gains around the 98.60/65 band ahead of the opening bell in Euroland.

US Dollar Index focused on data, ECB

The index is trying to keep the positive streak so far this week after Wednesday’s bull run faltered in new multi-day highs near 98.80.

This week’s up move in the Greenback comes in tandem with a strong rebound in yields of the US-10 year benchmark, managing to reclaim the vicinity of 1.80% always on the back of the improving mood in the risk-associated space.

In fact, fresh and auspicious news from the US-China trade front has boosted the sentiment around the riskier assets, pushing yields and the buck higher.

In addition, US Producer Prices surprised to the upside during August, lending at the same time fresh oxygen to the index.

Later in the day, the ECB gathering is expected to steal the show although market participants will also closely follow US inflation figures tracked by the CPI for the month of August. Additional data will see the usual weekly report on Initial Claims.

What to look for around USD

The Greenback managed to regain some poise on the back of positive data and fresh optimism from the trade front. At his last speech, Chief Powell reiterated his pledge to support the current expansion, while market participants are still factoring in potential interest rate cuts in the next meetings and a probable recession at some point in 2020. However, the constructive view in DXY still looks firm on the back of the solid labour market, strong consumer confidence and positive GDP readings, while inflation is seeing regaining upside traction in the near term. Also bolstering the buck emerges its safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.01% at 98.64 and faces the next hurdle at 99.37 (2019 high Sep.3) seconded by 99.89 (monthly high May 11 2017) and then 100.00 (psychological level). On the other hand, a breach of 98.01 (monthly low Sep.6) would aim for 97.74 (55-day SMA) and finally to 97.17 (low Aug.23).

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