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US Dollar Index meets initial support near 97.60, 2-week lows

  • The index remains on the defensive near 97.60.
  • US 10-year yields bounce off 1.75%.
  • US ISM Non-manufacturing expected at 55.5 in July.

The US Dollar Index (DXY), which gauges the buck vs. a basket of its main rivals, remains entrenched within the negative territory although it seems to have met some decent support near 97.60, or 2-week lows.

US Dollar Index now looks to trade, data, yields

The index is now managing to regain some composure in tandem with a tepid rebound in yields of the key US 10-year note, which have met decent contention in the 1.75% level for the time being.

Permanent uncertainty around the US-China trade war, the new round of US tariffs and potential Chinese retaliation continue to keep the sentiment sour around the buck and dragged the index to fresh multi-day lows near 97.60, down for the third session in a row after clinching YTD tops in the boundaries of 99.00 the figure last Thursday.

Later in the session, July’s ISM Non-manufacturing will be the only release of note, while FOMC’s L.Brainard (permanent voter, dovish) will speak on Payment System later.

What to look for around USD

The fresh bout of US tariffs on Chinese products has undermined the Fed-led rally in the buck to levels last seen in May 2017 beyond 98.00 the figure and eclipsed at the same time the mixed report from US Non-farm Payrolls for the month of July. By the same token, yields of the US 10-year benchmark have dropped to November 2016 levels in the sub-1.80% area. In the meantime, the US-China trade war is expected to remain the almost exclusive driver of the global sentiment for the time being. Regarding the greenback, its demand appears propped up by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals and the less dovish stance from the Federal Reserve.

US Dollar Index relevant levels

At the moment, the pair is losing 0.45% at 97.65 and a breakdown of 97.55 (21-day SMA) would open the door to 96.92 (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).

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