US Dollar Index comes under pressure near 96.80, focus on CPI

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  • DXY remains weak, approaches the 200-day SMA.
  • Yields of the US 10-year note dropped to 2.04%.
  • US inflation figures tracked by the CPI next of relevance.

The US Dollar Index (DXY), which measures the greenback vs. a basket of its main rivals, remains on the defensive on Thursday after breaking below the 97.00 support.

US Dollar Index offered on Powell, looks to CPI

The index is navigating the area of weekly lows near 96.80 in response to the dovish message from Chief Powell and the FOMC minutes on Wednesday.

In fact, the case for lower rates (insurance rate cuts) has strengthened after Powell stressed that uncertainty on the trade front and rising fears over the world growth continue to weigh on the outlook. Regarding inflation, Powell said that consumer prices could remain at the current low levels more than initially anticipated.

In the same direction, the FOMC minutes showed the Committee’s view is now tilted towards looser monetary conditions, also reinforcing the idea of rate cuts in the near/medium terms.

Later in the session, key US inflation figures gauged by the CPI for the month of June will be in the limelight seconded by usual weekly Claims.

Further out. Chief Powell will testify before the Senate Banking Committee, NY Fed J.Williams (permanent voter, centrist) speaks in New York, Atlanta Fed R.Bostic (2021 voter, centrist) will speak on Monetary Policy at Fiscal Conference, Richmond Fed T.Barkin (2021 voter, centrist) will speak at Rocky Mountain Economic Summit and Minneapolis Fed N,Kashkari (2020 voter, mega-dovish) speaks at en event in South Dakota.

What to look for around USD

The greenback has given away its weekly gains in response to the more-dovish-than-expected views from Chief Powell and the FOMC minutes. The Fed is now gearing up to cut rates, probably as early as this month’s meeting. Trade tensions and weakness overseas continue to cloud the outlook while concerns over the lack of upside traction in inflation remain unabated. Against this scenario, the greenback still looks underpinned by its safe have appeal, the status of ‘global reserve currency’ and solid US fundamentals when compared to its G10 peers.

US Dollar Index relevant levels

At the moment, the pair is retreating 0.19% at 96.89 and a breakdown of 96.83 (low Jul.11) would aim for 96.69 (200-day SMA) and then 96.46 (low Jun.7). On the upside, the next barrier emerges at 97.59 (high Jul.9) followed by 97.80 (monthly high Jun.3) and finally 98.37 (2019 high May 23).

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