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  • DXY met contention in the 97.85/80 band.
  • Poor data sparked growth fears and drag the index lower.
  • Yields of the US 10-year note dropped below 2.30%.

The greenback, when tracked by the US Dollar Index (DXY), is alternating gains with losses around the 97.80 region, looking to reverse Thursday’s significant sell-off.

US Dollar Index focused on data, trade

The index has turned negative for the week following yesterday’s important drop to weekly lows near 97.80 after reaching fresh 2019 highs near 98.40, all fuelled by renewed concerns over the US growth and a sharp decline in US money markets.

In fact, disappointing results from New Home Sales during April and preliminary readings from manufacturing and services PMIs for the current month have reignited growth concerns in the US economy. The selling pressure exacerbated later after yields of the US 10-year reference fell to the lowest level since October 2017 just below the 2.30% handle, at the same time dropping below yields of the 3-month note for the first time since May 15.

In the US data space, the only release today will be Durable Goods Orders for the month of April seconded by US oil rig count by Baker Hughes.

What to look for around USD

Poor prints in the US calendar on Thursday renewed concerns over the likeliness of a technical recession in the US economy in the next months and somewhat spooked USD-bulls. Additionally, US-China trade negotiations remain mired in the mud for the time being, while investors’ focus have now shifted to the probable intervention in the Yuan by the Chinese government. On another direction, the FOMC minutes reinforced the ‘patient’ stance from the Federal Reserve and the ‘transitory’ lack of upside momentum in domestic inflation. In addition, the Committee ruled out rate cuts in the next months and left the door open for extra tightening if the economy evolves as planned. The positive outlook on the buck, in the meantime, stays unchanged and sustained by overseas weakness, its safe haven appeal, favourable yield spreads vs. the Fed’s G10 peers and the status of global reserve currency.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.01% at 97.86 and faces the next up barrier at 98.37 (2019 high May 23) seconded by 98.97 (78.6% Fibo of the 2017-2018 drop) and finally 99.89 (monthly high May 11 2017). On the other hand, a break below 97.81 (low May 23) would open the door for 97.70 (21-day SMA) and then 97.03 (low May 13).