US Dollar Index looks for direction near 97.80

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  • DXY trades close to weekly tops around 97.80.
  • Yields of the US 10-year note bounce to 1.70%, drop afterwards.
  • Import/Export Price index coming up next on the docket.

The Greenback is trading without a clear direction at the end of the Asian session on Wednesday, taking the US Dollar Index (DXY) to the area of weekly peaks near 97.80.

US Dollar Index focused on trade

Trade tensions between the US and China have mitigated somewhat on Tuesday, allowing the demand for safe havens to lose some traction and also encouraging US yields to rebound from recent lows, all rendering in extra support for the buck.

In fact, the US has delayed tariffs on some Chinese products and removed others from the tariffs-list yesterday, opening the door at the same time for the resumption of trade talks in a couple of weeks in the US.

The news on tariffs sparked a moderate sell off in the Japanese Yen and lifted USD/JPY from the 105.00 neighbourhood to levels just below 107.00 the figure, adding further legs to the recovery in the Dollar.

Later in the session, Import/Export Prices will be the sole publication in the US docket, while attention will also be on the release of advanced figures of Q2 GDP in both Germany and the broader euro area.

What to look for around USD

Alleviated jitters on the US-China trade war and the likeliness of the continuation of talks between both parties in the near term gave renewed support to the index in past hours. By the same token, yields of the US 10-year benchmark have managed to bounce off multi-year lows, although they remain under pressure. These trade concerns, while unabated and in combination with the current inversion of the yield curve, carry the potential to spark further ‘insurance cuts’ by the Federal Reserve and thus undermine the constructive prospects of the buck in the next months. Opposed to this view emerges the Greenback’s safe have appeal, the status of ‘global reserve currency’, so far solid US fundamentals vs. overseas economies and the less dovish stance from the Federal Reserve (as per the latest FOMC event).

US Dollar Index relevant levels

At the moment, the pair is losing 0.01% at 97.82 and a breakdown of 97.35 (100-day SMA) would aim for 97.21 (low Aug.6) and then 96.95 (200-day SMA). On the other hand, the next up barrier emerges at 97.87 (61.8% Fibo of the 2017-2018 drop) seconded by 98.37 (monthly high May 23) and then 98.93 (2019 high Aug.1).

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