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  • DXY remains close to the 98.00 neighbourhood so far this week.
  • Focus stays on trade and US yield curve inversion.
  • Mortgage Applications, EIA report, Fedspeak next on the docket.

The US Dollar Index (DXY), which gauges the Greenback vs. a basket of its main rivals, is managing well to keep the trade above the 98.00 handle so far this week.

US Dollar Index looks to trade and yields

The index stays close to the 98.00 area on Wednesday, posting small gains so far and recovering ground lost after Tuesday’s pullback.

Price action around the Greenback remains directionless amidst the lack of any progress on the US-China trade front, where rumours and counter-rumours abound on the potential resumption of negotiations.

On another direction, the inversion of the 2y-10y yield curve continues to keep investors’ sentiment under pressure and caps any serious bullish attempts in the buck.

Later in the NA session, MBA Mortgage Approvals is due seconded by the weekly report on US crude oil supplies by the EIA. In addition, Richmond Fed T.Barkin (2021 voter, centrist) speaks at the West Virginia Chamber of Commerce and San Francisco Fed M.Daly (2021 voter, centrist) will speak at the RBNZ/IMF Conference in New Zealand.

What to look for around USD

The inversion of the yield curve in combination with trade jitters keep driving the mood in the Greenback amidst concerns of an upcoming recession in the US economy at some point in the next couple of years. In the meantime, the solid labour market plus strong consumer confidence appears to contradict this view for the time being, while inflation is seeing regaining upside traction in the near term. Powell recently reiterated that the Fed ‘will act as appropriate to sustain the expansion’, leaving the door open for probable rate cuts at the September/October meetings at his speech at the Jackson Hole Symposium, although he did not unveil any reaction function regarding the interest rate path for the upcoming months.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.07% at 98.08 and faces the next hurdle at 98.09 (high Aug.26) seconded by 98.45 (high Aug.23) and then 98.93 (2019 high Aug.1). On the other hand, a breach of 97.17 (low Aug.23) would aim for 97.01 (200-day SMA) and finally 96.67 (low Jul.18).