US Dollar Index recedes from tops above 97.00

  • The index fades the initial uptick beyond the 97.00 handle.
  • Yields of the US 10-year note come down to the 2.55% area.
  • Industrial Production, Capacity Utilization next on the docket.

The greenback, when tracked by the US Dollar Index (DXY), is now struggling for direction following the test of levels beyond 97.00 the figure earlier in the day.

US Dollar Index now focused on data

The index is navigating within a tight range between the 10-day and 21-day SMAs so far on Tuesday, all against the backdrop of alternating risk appetite trends and shrinking trade conditions, as we get closer to Easter holidays.

In the meantime, the US-China trade negotiations remain in centre stage so far this week, particularly following comments by US Sec. S.Mnuchin over the weekend, highlighting the recent progress made.

Moving forward, Industrial Production for the month of March is due next along with Manufacturing Production, Capacity Utilization and the NAHB index. In addition, Dallas Fed R.Kaplan (2020 voter, dovish) will speak at a Community Forum in New Mexico.

What to look for around USD

DXY keeps tracking the broad risk appetite trends while headlines coming from the US-China/US-EU trade fronts also collaborate with the price action. The recent mixed views from the FOMC minutes reinforce the neutral stance of the Fed in 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 neutral/bullish prospects of monetary policy vs. the dovish shift seen in its G10 peers are expected to keep occasional dips in the buck shallow for the time being.

US Dollar Index relevant levels

At the moment, the pair is losing 0.01% at 96.93 and a break below 96.75 (low Apr.12) would open the door to 96.69 (55-day SMA) and finally 96.06 (200-day SMA). On the downside, the next hurdle lines up at 97.22 (high Apr.10) seconded by 97.52 (high Apr.2) and then 97.71 (2019 high Mar.7).

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