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  • DXY comes under pressure near 99.40.
  • US 10-year yields keep losing momentum.
  • ADP report came in at 135K in September.

The US Dollar Index (DXY), which tracks the Greenback vs. a basket of its main competitors, is now fading the initial optimism and returns to the 99.20 region.

US Dollar Index looks supported above 99.00

Yields of the key US 10-year benchmark are extending the leg lower on Wednesday, dropping to the area of weekly lows around 1.62% as market participants continue to adjust to the recent miserable print from the ISM manufacturing and the associated recession fears.

It seems to be all about yields today for the buck, as the US-German spread differential has narrowed to 217 pts, the lowest level since early September.

Later in the week, the Greenback is expected to remain under the microscope in light of the publication of the ISM Non-manufacturing and Factory Orders (Thursday) and Non-farm Payrolls and the speech by Fed’s J.Powell (Friday).

In the US data space, the ADP report showed the private sector added 135K jobs during last month vs. 140K jobs forecasted and August’s 157K jobs (revised from 195K).

Later in the session, the EIA will publish its weekly report on US crude oil inventories ahead of the speech by New York Fed J.Williams (permanent voter, centrist) in San Diego.

What to look for around USD

The index came under selling pressure after hitting fresh 2019 highs above 99.60 on Tuesday. Further out, the sentiment around the buck is looking to recover following the shocking results from the ISM manufacturing, although the prospect still looks constructive amidst a divided FOMC vs. a broad-based dovish stance from the rest of the G-10 central banks. In spite of some key fundamentals appear to have run out of steam in past months, the labour market remains strong as well as consumer spending, while the recent pick up in inflation adds to the auspicious domestic scenario vs. the generalized slowdown in most of overseas economies. Domestic data in combination with politics and developments from the US-China trade front should be key in determining the next decision on interest rates amidst Powell’s ‘mid-term adjustment’. Looking at the broader picture, the positive view on the Dollar is also well underpinned by its safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is losing 0.03% at 99.14 and faces immediate contention at 98.60 (21-day SMA) seconded by 98.19 (55-day SMA) and finally 97.86 (monthly low Sep.13). On the other hand, a breakout of 99.67 (yearly high Oct.1) would aim for 99.89 (monthly high May 11 2017) and then 100.00 (psychological handle).