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  • The index gives away some gains after Tuesday’s YTD highs.
  • Yields of the US 10-year note plummet below 2.55%.
  • US-China trade talks, German IFO in the limelight.

The greenback, in terms of the US Dollar Index (DXY), is prolonging the positive start of the week and navigates the upper end of the range near 97.70 ahead of the opening bell in Euroland.

US Dollar Index up on data, sentiment

The upbeat mood around the buck lifted the index to fresh yearly peaks on Tuesday in the area just below 97.80, levels visited for the last time in June 2017, all on the back of solid US data releases, strong earnings reports in Wall Street and positive headlines from the US-China trade front.

In fact, the White House announced yesterday it will send officials to Beijing next week in order to resume talks and look to finally clinch a long-waited trade agreement.

On another direction, results from the US housing sector saw New Home Sales expanding 4.5% during March, or by 692K units, surpassing February’s print and initial estimates.

Later today in the US, the only event of note will be the weekly report on crude oil supplies by the EIA, while the release of the German IFO survey and the monetary policy meeting by the Bank of Canada will also grab attention.

What to look for around USD

The upbeat momentum in the buck appears sustained by solid prints in the domestic docket as of late in combination with weakness from overseas data, mostly from Euroland, while hopes of a US-China trade deal appears now re-ignited. The recent mixed views from the FOMC minutes reinforce the neutral stance of the Fed for the next months, although a rate raise has not been ruled out just yet. On the greenback’s positive side we find solid US fundamentals, its safe haven appeal, favourable yield spreads vs. its peers and the status of global reserve currency. This, plus the Fed’s current neutral/bullish prospects of monetary policy vs. the dovish shift seen in its G10 peers is expected to keep occasional dips in the buck shallow for the time being.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.04% at 97.63 and faces the next hurdle at 97.78 (2019 high Apr.23) seconded by 97.87 (high Jun.20 2017) and then 99.89 (high May 11 2017). On the other hand, a breach of 97.26 (low Apr.22) would aim for 96.85 (55-day SMA) and finally 96.75 (low Apr.12).