- DXY pushes higher and breaks above 97.60.
- Yields of the US-10 year note drop below 2.05%, daily lows.
- US Existing Home Sales coming up next.
The greenback, in terms of the US Dollar Index (DXY), is prolonging its march north on Tuesday and it has already recorded new monthly tops above 97.60.
US Dollar Index focused on ECB, Fed
Speculations of an insurance rate cut (25 bps) by the Federal Reserve at its meeting next week continues to lend wings to the sharp recovery in the buck, which has lifted the index back above the 97.60 level, or fresh monthly peaks.
In addition, expectations of extra monetary stimulus by the ECB at its meeting on Thursday have been weighing on EUR and forcing EUR/USD to trade in fresh multi-week lows.
Also helping DXY to gather extra steam, the US government managed to clinch a bipartisan deal yesterday to avoid the debt ceiling for the next couple of years.
Data wise today, June’s Existing Home Sales are next on tap seconded in relevance by the Richmond Fed manufacturing gauge.
What to look for around USD
Investors have already priced in a 25 bps interest rate cut hits month, while a larger rate cut appears to have lost consensus in the last sessions. Trade tensions, US-Iran geopolitical concerns and global growth worries continue to cloud the US outlook, however, while the absence of solid upside traction in inflation remains well in place. Confronting this scenario, the greenback still looks underpinned by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals when compared to its G10 peers and the shift to a more accommodative stance from the rest of the central banks.
US Dollar Index relevant levels
At the moment, the pair is gaining 0.38% at 97.66 and faces the next resistance at 97.80 (monthly high Jun.3) seconded by 97.87 (61.8% Fibo of the 2017-2018 drop) and finally 98.37 (2019 high May 23). On the flip side, a break below 96.67 (low Jul.18) would aim for 96.46 (low Jun.7) and then 96.04 (50% Fibo of the 2017-2018 drop).
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