US Dollar Index parked around 96.70 ahead of US CPI

  • The index remains within the familiar range this week.
  • US 10-year yields recede from tops near 2.18%.
  • US CPI for the month of May due later in the day.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, is trading without direction around the 96.70 region on Wednesday.

US Dollar Index looks to data, Fed

The index navigates the lower bound of the range following Friday’s sharp sell-off to the mid-96.00s, always against the backdrop of increasing speculations over the probable rate cuts by the Fed and persistent trade concerns.

In fact, cautiousness around the US-China trade dispute have been gaining ground as of late amidst rumours citing another potential meeting between President Trump and his Chinese peer, Xi Jinping, at the next G20 meeting in Japan later in the month.

On another direction, Producer Prices published yesterday confirmed the absence of upside traction and somehow lent wings to the idea that the Fed could move on rates to the downside in the next months, all weighing further on the buck.

Later today, US inflation figures measured by the CPI will be the salient event seconded by a 10-year note auction and the EIA report on crude oil supplies.

What to look for around USD

Markets’ idea of a probable rate cut by the Federal Reserve in the near to medium term (insurance cut?) have been underpinned by poor data from the labour market and producer prices, shifting all the attention to today’s CPI figures. However, and in spite of the recent results, the labour market remains strong, wage growth keep pushing higher and the overall economy looks healthy – specially when we consider the weakness in overseas economies – all begging the question whether current speculations of rate cuts are not overdone. In addition, US-China trade jitters remain everything but abated so far, shifting the focus of attention to the upcoming G20 meeting in Japan, where the issue should take centre stage.

US Dollar Index relevant levels

At the moment, the pair is losing 0.02% at 96.69 and a breakdown of 96.46 (low Jun.7) would open the door for 96.04 (50% Fibo of the 2017-2018 drop) and then 95.82 (low Feb.28). On the upside, the next resistance emerges at 96.98 (100-day SMA) seconded by 97.42 (55-day SMA) and finally 97.87 (61.8% Fibo of the 2017-2018 drop).

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