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  • The index turns positive near the 97.70 region.
  • Yields of the US 10-yer note ease from tops around 2.54%.
  • Q1 Nonfarm productivity seen expanding 3.6% QoQ.

The US Dollar Index (DXY), which measures the greenback vs. a basket of its main rivals, is now posting decent gains in the boundaries of 97.70.

US Dollar Index flirts with the 10-day SMA

The index is adding to yesterday’s gains, managing to rebound from new weekly troughs in the 97.20/15 band recorded during the FOMC event.

Today, the buck is testing the area of 97.70, where sits the 10-day SMA following as investors continue to adjust to the recent FOMC message and in response to mixed results from the US docket.

In fact, Initial Claims rose more than expected by 230K on a weekly basis, taking the 4-Week Average to 212.50K from 206.00K. Further data saw advanced Nonfarm Productivity at 3.6% QoQ in Q1, flash Unit Labor Costs expected to contract at a quarterly 0.9% QoQ during the same period and Challenger Job Cuts dropping to 40.0K during April (from 60.6K).

The continuation of the up move in DXY has been also sustained by favourable US-GE yield spreads, which have returned to levels around the 250 pts after shrinking to 244 pts earlier in the week.

Moving forward, Factory Orders for the month of March will close today’s docket across the pond.

What to look for around USD

The greenback recovered some of its shine in the wake of the FOMC event after Chief Powell disappointed dovish expectations and left no room for speculations of rate cuts in the next months. Concerns over the lack of traction in inflation now appear mitigated after Powell suggested the recent drop in inflation should be deemed as temporary. All in all, the constructive bias in the buck is posed to remain unchanged on the back of overseas weakness, its safe haven appeal, favourable yield spreads vs. its peers and the status of global reserve currency. Despite further progress in the US-China trade talks carries the potential to somewhat undermine the positive outlook on USD in the near term, rising scepticism among investors should mitigate bouts of optimism surrounding this event.

US Dollar Index relevant levels

At the moment, the pair is advancing 0.06% at 97.67 and faces the next up barrier at 98.32 (2019 high Apr.25) seconded by 99.89 (high May 11 2017) and then 100.51 (78.6% Fibo of the 2017-2018 drop). On the flip side, a break below 97.15 (low May 1) would aim for 96.98 (55-day SMA) and finally 96.75 (low Apr.12).