US Dollar Index regains further ground near 96.70

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  • The index adds to yesterday’s gains in the 96.65/70 band.
  • US 10-year yields lost momentum near 2.70%.
  • Fedspeak expected to drive the mood in the buck.

The US Dollar Index (DXY), which tracks the greenback vs. its main competitors, is extending the recovery from recent lows and is navigating the 96.60/70 band.

US Dollar Index looks to Fedspeakers

The index is up for the second session in a row today, regaining some buying interest after bottoming out in weekly lows new 96.30 earlier in the week.

The greenback has reverted a negative first half of the week, as rising hopes on a probable deal on the US-China trade dispute have been sustaining the better mood in the risk-associated assets.

However, the FOMC minutes appear to have put some floor to the buck’s decline this week, as although they sounded somewhat dovish regarding the balance sheet, the tone was different when came to rates, leaving the likeliness of further hikes well on the table this year, albeit (very) data dependent

In the US data space, a slew of Fed speakers should keep the buck entertained throughout the day: Atlanta Fed R.Bostic (non-voter, dovish) speaks in New York, VP R.Clarida (permanent voter, dovish) and NY Fed J.Williams (permanent voter, centrist) will discuss inflation in New York. Furthermore, St. Louis fed J.Bullard (voter, dovish), Philly Fed P.Harker (non voter, dovish) and R.Quarles (permanent voter, centrist) will take part in a panel discussion on the balance sheet.

What to look for around USD

The FOMC minutes were not as dovish as expected. In fact, the Committee signalled the recent shift in the Fed’s stance was not associated to weakness in the economy but to rising uncertainty in the global markets. Despite the low inflation was back on the debate, the Fed did not rule out further hikes later in the year, although a move on rates remains highly data dependent. On another front, the US-Sino trade talks remain the almost exclusive driver for the markets’ mood in the near term. Furthermore, the deterioration in overseas fundamentals in combination with ‘softer’ stance in G10 central banks should keep occasional dips in the buck somewhat shallow.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.02% at 96.63 facing the next hurdle at 96.80 (10-day SMA) followed by 97.09 (high Feb.19) and then 97.37 (2019 high Feb.15). On the flip side, a breach of 96.29 (low Feb.20) will target 96.22 (38.2% Fibo of the September-December up move) en route to 95.59 (200-day SMA).

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