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  • DXY keeps losing ground, near 98.60.
  • Yields edge higher and approach the 1.50% area.
  • US trade deficit came in at $54.0 billion in July.

The Greenback, in terms of the US Dollar Index (DXY), remains on the corrective downside and is already testing lows around the 98.60 area.

US Dollar Index off 2019 highs beyond 99.00

The index is down for the second session in a row today after USD-bulls could not sustain Tuesday’s new YTD tops in the boundaries of 99.40.

Poor ISM figures have sparked concerns over a probable recession in the US economy and reignited speculations of extra easing by the Federal Reserve in the next months, all morphing into a wave of selling orders hitting the buck.

Today’s data showed the trade deficit narrowed a tad to $54.0 billion during July, missing expectations. Moving forward, the API will publish its report on US crude oil supplies and the Fed will publish its Beige Book.

Additionally, New York Fed J.Williams (permanent voter, centrist) is due to speak followed by the participation of FOMC’s M.Bowman (permanent voter, centrist) and St. Louis Fed J.Bullard (voter, mega-dovish) in a ‘Fed Listens’ event. Later, Minneapolis Fed N.Kashkari (2020 voter, dovish) speaks in Townhall and Chicago Fed C.Evans (voter, centrist) will speak on North American Trade.

What to look for around USD

News that US and China are struggling to return to the negotiating table and the US economy could be heading into a recession weighed on the buck as of late. The rally in the Greenback appears to be taking a breather for the time being amidst another sell off in US yields to fresh lows. Therefore, DXY is expected to remain vigilant, as Chief Powell’s ‘mid-term adjustment’ could extend further in the next months in order to ‘sustain the expansion’, opening the door to potential extra rate cuts. On the positive side for USD emerge the solid labour market, strong consumer confidence and positive GDP readings, while inflation is seeing regaining upside traction in the near term.

US Dollar Index relevant levels

At the moment, the pair is down 0.33% at 98.64 and a breach of 98.11 (21-day SMA) would open the door to 97.17 (low Aug.23) and finally 97.06 (200-day SMA). On the flip side, the next up barrier lines up at 99.37 (2019 high Sep.3) seconded by 99.89 (monthly high May 11 2017) and then 100.00 (psychological level).