US Dollar Index loses momentum near 97.60
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US Dollar Index loses momentum near 97.60

  • The index moves to 3-week highs near 97.60, loses traction afterwards.
  • US 10-year yields recede from tops near 2.07%.
  • NFIB index came in at 103.3, a tad above estimates.

The greenback, in terms of the US Dollar Index (DXY), keeps the bid note unchanged although off fresh 3-week highs in the boundaries of 97.60.

US Dollar Index now looks to Powell, FOMC

DXY is posting gains for the third straight session on Tuesday in tandem with the recovery in US yields and sustained by diminishing odds of a significant rate cut at the July meeting (50 bps).

In fact, investors are now gauging the likeliness of just a 25 bps rate cut by the Fed (insurance cut) later in the month, as the recent solid prints from the US labour market removed tailwinds from a larger move on rates.

In today’s docket, the NFIB index came in a tad above estimates at 103.3 for the month of June, while May’s JOLTS Jobs Openings is due later.

Markets’ attention, however, remain on tomorrow’s testimony by Chief J.Powell before the Senate, seconded by the publication of the FOMC minutes and Thursday’s key June inflation figures.

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 0.13% at 97.49 and faces the next up barrier at 97.59 (high Jul.9) followed by 97.80 (monthly high Jun.3) 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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