- DXY trades within a tight range in the 97.70 region.
- Yields of the US 10-year note dropped to sub-1.6% levels.
- The US 2y-10y yield curve inverted for the first time since 2007.
The Greenback, when tracked by the US Dollar Index (DXY), has faded the earlier spike to the area above 97.80 and has now receded to the 97.70 region.
US Dollar Index looks to yields, data
The index is now struggling for direction after a positive start of the week, although gains remain limited by the vicinity of the key 98.00 barrier.
In the FI universe, yields of the key US 10-year benchmark fell to the area below 1.60%, or fresh three-year lows, at the same time prompting the 2y-10y yield curve to invert for the first time since 2007.
Nothing noteworthy in the data space, where Import Prices rose 0.2% MoM in July and Export Prices also gained 0.2% inter-month, both prints coming in above expectations ahead of tomorrow’s more relevant publications: Retail Sales, the Philly Fed index and the Empire State index.
What to look for around USD
Alleviated jitters on the US-China trade war and the likeliness of the continuation of talks between both parties in the near term gave renewed support to the index in past hours. By the same token, yields of the US 10-year benchmark have managed to bounce off multi-year lows, although they remain under pressure. These trade concerns, while unabated and in combination with the current inversion of the yield curve, carry the potential to spark further ‘insurance cuts’ by the Federal Reserve and thus undermine the constructive prospects of the buck in the next months. Opposed to this view emerges the Greenback’s safe have appeal, the status of ‘global reserve currency’, so far solid US fundamentals vs. overseas economies and the less dovish stance from the Federal Reserve (as per the latest FOMC event).
US Dollar Index relevant levels
At the moment, the pair is losing 0.02% at 97.81 and a breakdown of 97.35 (100-day SMA) would aim for 97.21 (low Aug.6) and then 96.95 (200-day SMA). On the other hand, the next up barrier emerges at 97.87 (61.8% Fibo of the 2017-2018 drop) seconded by 98.37 (monthly high May 23) and then 98.93 (2019 high Aug.1).