US Dollar Index looks for direction near 98.60, focus on data, oil

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  • DXY attempts to consolidate following Monday’s gains.
  • Yields of the US-10 year note navigate below the 1.85% area.
  • US Industrial Production, NAHB index, TIC Flows next on tap.

The Greenback, in terms of the US Dollar Index (DXY), is trading without direction around the 98.60 region following the closing bell in Asian on Tuesday.

US Dollar Index focused on data, geopolitics

The index started the week on a firm note, quickly leaving behind last Friday’s moderate pullback to the area below the key support at 98.00 the figure.

The renewed risk-aversion mood following the attacks on Saudi oil facilities last Saturday gave extra support to the buck and pushed DXY back to the mid-98.00s ahead of the key FOMC event tomorrow.

It is worth recalling that a 25 bps ‘insurance cut’ is practically priced in, all under Powell’s ‘mid-term adjustment’ and in order to ‘sustain the ongoing expansion’. In spite of the rate cut, a dovish tone at the FOMC meeting is not a done deal, particularly following the latest inflation figures results and Retail Sales, which continue to sustain the view of a strong consumer sentiment and spending.

Later in the NA session, Industrial/Manufacturing Production is due, seconded by Capacity Utilization, the NAHB index and TIC Flows.

What to look for around USD

DXY regained poise at the beginning of the week and managed to retake the 98.60 region so far. Later this week, the Fed is expected to extend its ‘mid-cycle adjustment’ and reduce the FFTR by another 25 bps, all under the pledge to ‘sustain the ongoing expansion’. Markets, however, appear somewhat overconfident in the fact that the Federal Reserve will embark on a sustained reduction of interest rates, leaving the door wide open for a probable disappointment at this week’s event. Looking at the broader picture, the positive view on the Dollar is well underpinned by the solid US labour market, strong consumer confidence and spending and the auspicious pick up in consumer prices, all adding to the buck’s safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is retreating 0.04% at 98.61 and a breakout of 99.10 (high Sep.12) would aim for 99.37 (2019 high Sep.3) and then 99.89 (monthly high May 11 2017). On the downside, immediate support emerges at of 97.86 (monthly low Sep.13) followed by 97.58 (100-day SMA) and finally 97.17 (low Aug.23).

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