- DXY remains above the 99.00 handle, near 4-week highs.
- Yields of the US 10-year note look sidelined around 1.70%.
- PCE, Personal Income/Spending next on the docket.
The Greenback appears to be taking a breather at the end of the week after climbing to fresh 3-week highs near 99.30 when tracked by the US Dollar Index (DXY).
US Dollar Index now looks to data, politics
The index gathered extra pace in past sessions following a deeper retracement in rival currencies like EUR and GBP on the back of the deteriorated sentiment in the euro area and increasing UK political concerns and Brexit uncertainty.
In addition, the US-China trade front keeps helping the risk-associated universe in detriment of the demand for safe havens and thus motivating JPY sellers to return to the markets.
US yields, in the meantime, stay sidelined around 1.70% and remain vigilant on US politics, where President Trump and the Democrat’s impeachment inquiry remains in the centre of the debate.
Later in the session, Durable Goods Orders is due along with Personal Income/Spending, inflation figures tracked by the PCE and the final U-Mich print for the month of September. In addition, FOMC’s R.Quarles (permanent voter, centrist) will speak on Macroprudential Regulation and Philly Fed P.Harker (2020 voter, dovish) will speak to the Shadow Open Market Committee.
What to look for around USD
Market participants have already digested the recent FOMC event and appear to have shifted their focus to the US-China trade war once again. Domestic data in combination with politics and trade developments should be key in determining the next decision on rates after Fed’s Powell left the door open for extra easing along the road. However, the increasing dissent among FOMC members casts further clouds on the probability of extra stimulus at the upcoming meetings, leaving the outlook on interest rates quite mixed, to say the least. Looking at the broader picture, the positive view on the Dollar is still well underpinned by the solid US labour market, strong consumer confidence and spending and the auspicious pick up in consumer prices, all adding to the safe haven appeal and the status of ‘global reserve currency’.
US Dollar Index relevant levels
At the moment, the pair is losing 0.05% at 99.16 and faces immediate contention at 97.86 (monthly low Sep.13) followed by 97.67 (100-day SMA) and finally 97.17 (low Aug.23). On the other hand, a breakout of 99.28 (high Sep.26) would aim for 99.37 (2019 high Sep.3) and then 99.89 (monthly high May 11 2017).