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  • The index moves to session tops above 97.70.
  • EUR loses further momentum on declining yields.
  • US, UK markets remain closed on Monday.

The US Dollar Index (DXY), which tracks the greenback vs. its main competitors, has managed to reverse the initial negative mood and is now testing daily highs in the 97.70/75 band.

US Dollar Index stronger on sentiment

After two consecutive daily pullbacks, the index is now reversing that leg lower and has managed to regain the 97.70/75 band, where some resistance appears to have emerged.

In spite of the lack of fresh developments, US-China trade effervescence remain the key driver when comes to determine the price action in the global markets as well as the direction of the broad risk-appetite trends.

The greenback is trading on a better note at the beginning of the week following renewed weakness in some of its rivals, where the drop in yields of the German 10-year reference to multi-year lows is the salient event so far.

In the US data sphere, another revision of Q1 GDP, inflation figures tracked by the PCE, Personal Income/Spending, U-Mich index and Fedspeak are all due later in the week.

What to look for around USD

Recent poor prints in the US calendar triggered new concerns over the likeliness of a technical recession in the US economy in the next months and somewhat spooked USD-bulls. Additionally, US-China trade negotiations remain mired in the mud for the time being, while investors’ focus has now shifted to the probable intervention in the Yuan by the Chinese government. On another direction, the FOMC minutes reinforced the ‘patient’ stance from the Federal Reserve and the ‘transitory’ lack of upside momentum in domestic inflation. In addition, the Committee ruled out rate cuts in the next months and left the door open for extra tightening if the economy evolves as planned. The positive outlook on the buck, in the meantime, stays unchanged and sustained by overseas weakness, its safe haven appeal, favourable yield spreads vs. the Fed’s G10 peers and the status of global reserve currency.

US Dollar Index relevant levels

At the moment, the pair is advancing 0.12% at 97.73 facing the next resistance at 97.81 (10-day SMA) followed by 98.37 (2019 high May 23) and finally 98.97 (78.6% Fibo of the 2017-2018 drop). On the other hand, a break below 97.55 (low May 27) would open the door for 97.27 (55-day SMA) and then 97.03 (low May 13).