- DXY moved near 97.50 on Tuesday on upbeat data releases.
- US 10-year yields recede to the 2.10% area.
- US Housing Starts, Building Permits, Fed’s beige Book next on tap.
The US Dollar Index (DXY), which tracks the greenback vs. its main rivals, is struggling for direction on Wednesday and returns to the 97.30 region.
US Dollar Index looks to data, trade
The index gathered extra steam on Tuesday following auspicious results from Retail Sales during June, expanding more than expected. Extra optimism came in later in the day with better-than-forecasted results from Manufacturing Production, the NAHB index and Business Inventories.
There was no news from the speech by Chief Powell in Paris, where he reiterated the Fed will act to support the economic expansion, all amidst rising bets on a rate cut later this month. In addition, Powell noted that FOMC members remain concerned over global growth, Brexit uncertainty, the federal debt ceiling and persistent inflation below the Fed’s target.
Also lending some wings to the buck, President Trump poured cold water over expectations of a US-China trade deal, noting that there is still a long way to go in negotiations. He even hinted at the likeliness of extra tariffs on Chinese products worth $325 billion.
In the data space later today, the focus of attention will be on the US housing sector with the releases of June figures for Housing Starts and Building Permits seconded by the EIA weekly report on crude oil inventories and the publications of the Fed’s Beige Book.
What to look for around USD
DXY has recovered some composure after once again testing the vicinity of the 200-day SMA in the 96.70 region on Friday, all in response to the dovish message from Chief Powell and the FOMC minutes. Speculations among investors have already priced in a 25 bps rate cut hits month, although a bigger rate cut is not utterly ruled out just yet. Trade tensions and global growth concerns continue to cloud the US outlook while the lack of upside traction in inflation remains worrisome. Confronting this scenario, the greenback still looks underpinned by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals when compared to its G10 peers and the shift to a more accommodative stance from the rest of the central banks.
US Dollar Index relevant levels
At the moment, the pair is losing 0.06% at 97.31 and faces the next resistance at 97.59 (high Jul.9) followed by 97.80 (monthly high Jun.3) and finally 98.37 (2019 high May 23). On the flip side, a break below 96.73 (200-day SMA) would aim for 96.46 (low Jun.7) and then 96.04 (50% Fibo of the 2017-2018 drop).
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