US Dollar Index looks for direction near 96.40, Powell eyed

• The index finds support near 96.30.
• US 10-year yields recede from tops and return to 2.65%.
• Fed’s Powell Semi-Annual testimony will be the salient event today.

The greenback keeps navigating the lower bound of the recent range around the 96.40 region when tracked by the US Dollar Index (DXY).

US Dollar Index focused on Powell

The index struggles for direction on Tuesday after two consecutive declines, so far finding decent support in the 96.40/30 band amidst a generalized upbeat sentiment in the risk-associated universe.

The recent progress made in the US-China trade talks motivate investors to keep the optimism intact over the likeliness of a positive outcome of the negotiations, sustaining the demand for riskier assets and the hunt for yield.

Event-wise today, the buck is expected to remain under scrutiny in light of the testimony by Fed’s J.Powell before the Senate Banking Panel later in the European evening. Consensus is tilted to a dovish message from Powell, where the balance sheet and the rate path should be in the centre of the debate.

In the US docket, the housing sector will take centre stage today with the releases of Housing Starts, Building Permits and the S&P-Case/Shiller index. In addition the Conference Board’s gauge of Consumer Confidence for the month of February is also due.

What to look for around USD

The US-China trade dispute remains in centre stage when comes to drive the global sentiment for the time being. This week will also see the Trump-Kim meeting as a potential driver on the geopolitical side. The release of another estimate of the Q4 GDP (Thursday) will also give markets and idea of how the US economy fared in late 2018. Attention will also be on Chief Powell’s testimonies, where the centre of the debate is expected to gyrate around the Fed’s plans on the balance sheet, the reassessment of the tightening cycle and the renewed patient stance of the Fed.

US Dollar Index relevant levels

At the moment, the pair is losing 0.03% at 96.38 and a breach of 96.29 (low Feb.20) will target 96.22 (38.2% Fibo of the September-December up move) en route to 95.62 (200-day SMA). On the flip side, the initial hurdle aligns at 96.69 (10-day SMA) followed by 97.09 (high Feb.19) and then 97.37 (2019 high Feb.15).