- DXY left the vicinity of 99.00 on Thursday on Trump’s new tariffs.
- Yields of the US 10-year note plummeted below 1.90%.
- US-China trade war, On-farm Payrolls next of relevance.
The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, is alternating gains with losses in the mid-98.00s amidst fresh trade concerns and ahead of the release of July’s Payrolls.
US Dollar Index now looks cautious around 98.50
After testing the boundaries of the 99.00 handle in the wake of the FOMC meeting on Thursday, the index came under considerable selling pressure after President Trump suddenly announced 10% tariffs on Chinese products worth $300 billion.
The announcement caught markets off guards, particularly after previous comments highlighted that talks in Shanghai earlier this week have been ‘constructive’. The news motivated investors to run for US bonds, forcing yields of the US 10-year reference to tumble to sub-1.90% levels for the first time since November 2016.
USD also derived some weakness after the ISM Manufacturing dropped to 51.2 during July, disappointing expectations. Later today, July’s non-farm Payrolls are seen at nearly 170K while the jobless rate is expected to stay put at 3.7%.
What to look for around USD
The les-dovish-than-expected tone from the FOMC event and diminishing odds for further rate cuts this year have added extra oxygen to the buck in past hours. However, trade jitters are back to the fore and have been weighing on sentiment, hurting yields and motivating DXY to trim part of its recent strong gains. Investors will closely follow today’s Payrolls amidst the renewed and heightened ‘data dependent’ stance from the Fed. Looking at the longer run, the demand for the greenback looks underpinned by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals and the broad-based shift to a more accommodative stance from the rest of the G-10 central banks.
US Dollar Index relevant levels
At the moment, the pair is losing 0.02% at 98.38 and a breakdown of 97.98 (10-day SMA) would open the door to 96.91 (200-day SMA) and then 96.67 (low Jul.18). On the flip side, the next up barrier aligns at 98.93 (2019 high Aug.1) seconded by 99.89 (monthly high May 2017) and finally 100.00 (psychological level).