US Dollar Index looks to extend gains near 96.50

• The index is flirting with the 21-day SMA around 96.50.
• Yields of the US 10-year note a tad below 2.77%.
• US, China closer to a trade deal.

The US Dollar Index (DXY), which gauges the greenback vs. a basket of its main rivals, is clinging to its daily gains in the mid-96.00s amidst increasing optimism over a potential US-China trade agreement.

US Dollar Index focused on data

The index has started the week on a bid tone against the backdrop of renewed optimism over a probable US-China trade deal. In fact, newspaper WSJ reported on Sunday that both parties could be closing in to an agreement to end the ongoing trade dispute.

Furthermore, President Trump and China’s Xi Jinping could be at some point in mid-March to clinch the deal.

On another front, the greenback has managed to leave behind another bout of criticism by President Trump to the Fed’s ongoing QT, after he once again reiterated the currency is too strong.

Nothing worth mentioning in the data space today, while the publication of the ISM Non-manufacturing tomorrow will be in centre stage.

What to look for around USD

The US-China trade negotiations remain in centre stage and are expected to keep ruling the sentiment in the upcoming days, with markets re-shifting their focus to the Trump-Xi meeting later in the month. The greenback is also expected to stay somewhat cautious on fresh criticism by Trump to the Fed’s monetary policy and the level of the buck. However, the health of the US economy has come back to the fore following auspicious results from the Q4 GDP, which appear to have not only motivated USD bulls to return to the markets but also poured cold water over speculations of a potential halt of the Fed’s tightening cycle.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.03% at 96.46 and a break above 96.52 (21-day SMA) would open the door to 96.79 (23.6% Fibo of the September-December up move) and finally 97.37 (2019 high Feb.15). On the flip side, initial contention emerges at 95.82 (low Feb.28) seconded by 95.66 (200-day SMA) and then 95.16 (low Jan.31).