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  • The index corrects lower and flirts with the 98.00 handle.
  • US 10-year yields meet support near 2.50%.
  • US PCE figures for the month of March next of relevance.

The greenback, in terms of the US Dollar Index (DXY), is trading on the defense at the beginning of the week, adding to Friday’s losses around the 98.00 mark.

US Dollar Index looks to data

The index is down for the second session in a row on Monday, prolonging the rejection from last week’s 2019 highs in the 98.30/35 band.

The sentiment in the broader markets appears to have improved somewhat in the last couple of the sessions, removing tailwinds from the rally in the buck while cautiousness is expected to raise ahead of the FOMC meeting on Wednesday and the always-critical jobs report at the end of the week.

Later in the NA session, inflation figures tracked by the PCE will grab all the attention ahead of Personal Income/Spending for the month of March.

What to look for around USD

The upbeat momentum around the greenback remains well and sound for the time being. Auspicious developments from the domestic economy appear to have allayed speculations of a potential recession in the next quarters: the economy is expanding at an annualized 3.2%, the inversion of the yield curve was only an ephemeral event and wages are growing at a solid pace above 3%. Despite the latest FOMC minutes reinforced the neutral/data-dependent stance from the Fed, a rate hike this year is not entirely off the table yet. Further support for the buck is expected to come in the form 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 receding 0.08% at 97.98 and a breach of 97.85 (low Apr.26) would open the door to 97.35 (21-day SMA) and finally 97.26 (low Apr.22) On the upside, the next resistance emerges 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).