US Dollar Index looks to extend gains around 97.40

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  • DXY is trading at shouting distance from 97.50.
  • Yields of the US 10-year note ease to the 2.03% area.
  • Fedspeak next of relevance ahead of Powell, FOMC minutes.

The greenback is trading without a clear direction on Tuesday, although it stays near recent tops in the 97.40 region when tracked by the US Dollar Index (DXY).

US Dollar Index focused on Fedspeak

The index appears to have met quite a strong hurdle near 97.50 so far this week amid swelling cautiousness ahead of Chief J.Powell’s testimony before the Senate tomorrow and the release of the FOMC minutes.

The upside momentum in the greenback comes in response to diminishing expectations of an aggressive move by the Federal Reserve at this month’s meeting (50 bps rate cut), which have re-surfaced after the solid print from US Payrolls in June.

Later today, the NFIB index is due seconded by JOLTS Job Openings. In addition, St.Louis Fed J.Bullard (voter, dovish) will give welcoming comments in St. Louis and Atlanta Fed R.Bostic (2021 voter, centrist) will speak at Washington University, also in St.Louis.

What to look for around USD

The solid print from June’s Payrolls added extra wings to the positive performance of the greenback in the last couple of weeks, exacerbated by the breakout of the critical 200-day SMA and the multi-month resistance line, all in the 96.60 region. This week, all eyes will be on Chief Powell’s testimony and the FOMC minutes (both events on Wednesday) against the backdrop of now shrinking speculations of a rate cut in the very near term. DXY, in the meantime, appears supported by rising yields, solid fundamentals – despite the lack of sustainable upside traction in inflation – the safe have appeal of the buck and its status of ‘global reserve currency’; while deceleration in overseas economies and the shift to a more accommodative stance from Fed’s peers also collaborate with the upbeat mood in USD. On the negative side, it will be interesting to gauge the impact (if any at all) of President Trump’s criticism to the Fed’s policy on the views of the Committee. In addition, swelling scepticism around the resumption of the US-China trade talks could also hamper further gains.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.01% at 97.37 and faces the next up barrier 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 downside, a breakdown of 97.31 (55-day SMA) would aim for 97.09 (100-day SMA) and then 96.46 (low Jun.7).

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