US Dollar Index hovers around 97.90
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US Dollar Index hovers around 97.90

  • DXY trades near YTD highs just below he 98.00 mark.
  • Wuhan virus keeps weighing on global sentiment.
  • FOMC, GDP, PCE to take centre stage later this week.

The greenback, when tracked by the US Dollar Index (DXY), is trading on a cautious tone in the area of yearly highs just below the 98.00 mark.

US Dollar Index focused on data, virus

The index has started the week slightly on the defensive, shedding some ground following Friday’s new yearly highs in levels just shy of the key barrier at 98.00 the figure.

The dollar’s tight range follows the cautiousness in the global markets in response to the unremitting advance of the Wuhan coronavirus, which already killed over 80 people in China and continues to spread.

Developments surrounding the outbreak of the virus in China have prompted market participants to lean towards the safe haven universe, dragging US yields lower and therefore keeping the buck under pressure.

Nothing worth mentioning data wise in the US docket on Monday, while all the attention will be on the FOMC meeting (Wednesday) seconded in relevance by the Conference Board’s Consumer Confidence gauge (Tuesday), advanced Q4 GDP figures (Thursday) and inflation figures tracked by the PCE (Friday).

What to look for around USD

DXY extended the recent breakout of the key 200-day SMA to the proximity of the 98.00 mark, where it has lost some upside momentum for the time being. In the meantime, news from the Chinese coronavirus and uncertainty regarding the US-China ‘Phase 2’ deal underpin occasional bouts of risk aversion and maintain the dollar under scrutiny. On another scenario, the index keeps the positive view above the 200-day SMA, always supported by the current ‘wait-and-see’ stance from the Fed vs. the broad-based dovish view from its G10 peers, the dollar’s safe haven appeal and its status of ‘global reserve currency’. Later in the week, key US data releases are expected to rule the sentiment around the index in the very near term.

US Dollar Index relevant levels

At the moment, the index is losing 0.01% at 97.88 and is expected to meet the next support at 97.71 (200-day SMA) seconded by 97.55 (55-day SMA) and then 97.09 (weekly low Jan.16). On the flip side, a break above 97.95 (2020 high Jan.24) would aim for 97.54 (monthly high Nov.29 2019) and finally 98.93 (high Aug.1 2019).

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