US Dollar Index extends gains to the 97.90 region, focus on Fed, trade

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  • DXY moves higher to levels just below the 98.00 handle.
  • US 10-year yields drop to 2-week lows around 1.75%.
  • FOMC minutes will be the salient event later today.

The greenback, when tracked by the US Dollar Index (DXY), is adding to Tuesday’s gains in the 97.90 region.

US Dollar Index focused on trade and FOMC

The index has managed to regain some poise after some decent support appears to have emerged in the 97.70/65 band. The immediate target is now at the 98.00 handle amidst increased and renewed US-China trade concerns.

Furthermore, fresh trade jitters have forced US 10-year yields to keep losing ground and recede to the 1.75% region, or 2-week lows, against a broad-based shift to the safe haven universe.

In the docket, MBA Mortgage Applications are due ahead of the key FOMC minutes, expected in the European evening.

What to look for around USD

The index seems to have met solid contention in the 97.70 region for the time being. In the meantime, headlines from the US-China trade dispute are expected to remain as the exclusive driver when comes to price action in the global markets, while investors keep monitoring US fundamentals amidst the ‘wait-and-see’ stance from the Federal Reserve and the steepening of the 2y-10y yield curve seen as of late. Moving to US politics, markets keep ignoring the Trump’s impeachment developments, while the impact on the FX space remains muted. On the broader view, however, the outlook on the greenback still looks constructive on the back of the Fed’s ‘wait-and-see’ mode vs. the dovish stance from its G10 peers, the dollar’s safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is advancing 0.08% at 97.90 and a breakout of 98.45 (monthly high Nov.13) would open the door to 99.25 (high Oct.8) and then 99.67 (2019 high Oct.1). On the flip side, immediate contention emerges at 97.68 (monthly low Nov.18) seconded by 97.56 (200-day SMA) and finally 97.11 (monthly low Nov.1).

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