- DXY remains sidelined below the 200-day SMA.
- Yields of the 10-year note rebound and approach 1.80%.
- Existing Home Sales, Chicago Fed index expected later.
The greenback is prolonging the sidelined trading in the middle of the week, taking the US Dollar Index (DXY) to the 97.60 region.
DXY still capped by the 200-day SMA
The index keeps struggling for direction in the upper end of the weekly range, near 2020 highs although a breakout of the critical 200-day SMA in the 97.70 region still looks elusive.
In the meantime, risk appetite trends continue to alternate along with developments from the recent outbreak of the Chinese Whuan coronavirus and the first confirmed case in the US (Seattle).
On the trade front, President Trump said at his speech at the World Economic Forum in Davos on Wednesday that the relationship with China ‘has never been better’, at the same time suggesting that negotiations for the ‘Phase 2’ deal could start soon. Still with Trump, he stressed that the US could impose tariffs to EU cars if both parties fail to clinch a deal.
Later in the NA session, the Chicago Fed Activity Index is due seconded by the more relevant Existing Home Sales for the month of December.
What to look for around USD
DXY keeps the weekly rangebound theme unchanged for the time being, and still targets the key 200-day SMA in the 97.70 zone. In the meantime, news from the Chinese coronavirus and uncertainty regarding the US-China ‘Phase 2’ deal underpin bouts of risk aversion and maintain the buck under some pressure. On another scenario, the index should regain the constructive view above the 200-day SMA, always supported by the current ‘wait-and-see’ stance from the Fed (confirmed once again at the latest FOMC minutes) vs. the broad-based dovish view from its G10 peers, the dollar’s safe haven appeal and its status of ‘global reserve currency’.
US Dollar Index relevant levels
At the moment, the index is gaining 0.02% at 97.62 and a breakout of 97.73 (2020 high Jan.20) would open the door to 97.87 (61.8% Fibo of the 2017-2018 drop) and then 98.54 (monthly high Nov.29 2019). On the other hand, the next support emerges at 97.09 (weekly low Jan.16) followed by 96.36 (monthly low Dec.31) and finally 96.04 (50% Fibo of the 2017-2018 drop).
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