US Dollar Index grinds lower, gyrates around 96.30

  • The index remains under pressure in the 96.30 region so far this week.
  • Yields of the US 10-year note move higher and flirt with 2.75%.
  • TIC Flows, API report, US-China trade to drive sentiment.

The greenback, in terms of the US Dollar Index (DXY), is now struggling for direction amidst a generalized consolidative theme around the 96.30 region.

US Dollar Index looks to trade talks

The index has faded yesterday’s uptick to the 96.50 region and returned to the current 96.30/20 band, always within the prevailing rangebound pattern in the upper end of the recent range.

In the meantime, investors appear to have re-shifted their focus to the ongoing US-China trade talks ahead of the meeting between US and Chinese officials at the end of the month in Washington.

The current lack of direction in the greenback echoes in the consolidative performance in yields of the key US 10-year reference, with the upside so far capped by the 2.80% area.

In the data space, TIC Flows are due later in the NA session followed by the weekly report on US crude oil supplies by the API.

What to look for around USD

The US shutdown entered its fourth consecutive week so far amidst the continuation of the disagreement between Democrats and Republicans over the funding for Trump’s planned wall in the US-Mexican border. In addition, the US-China trade dispute has returned to the fore and is expected to drive the sentiment in the near term. In the longer run, the probability that the Fed could re-assess its rate path for the next months coupled with the performance of the US economy should remain in centre stage.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.01% at 96.30 facing the next resistance at 96.48 (high Jan.22) seconded by 96.61 (55-day SMA) and finally 96.96 (2019 high Jan.2). On the flip side, a breakdown of 96.10 (21-day SMA) would open the door to 96.02 (10-day SMA) and then 95.76 (50% Fibo of the September-December up move).

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