US Dollar Index regains upside traction, approaches 97.80

• DXY moves higher near the 97.80 region.
• Yields of the US 10-year note drop below 1.5%.
• Markets’ focus shifts to US-China trade, Trump.

The Greenback, when tracked by the US Dollar Index (DXY), has regained some poise at the beginning of the week and advances to the 97.80 area.

US Dollar Index focused on trade

Following Friday’s sharp pullback on the escalation of tarde frictions between the US and China, the index has started this week on a positive footing and is looking to regain the vicinity of the 98.00 mark.

DXY abruptly erased its last week’s gains on Friday after China announced retaliatory measures against the US, including tariffs on soybeans, oil, autos and auto parts, all starting on September 1 and December 15. In response, President Trump announced extra tariffs and called US companies to leave China.

News from Powell’s speech at the Jackson Hole Symposium noted the Fed remains committed to sustain the current expansion, leaving at the same time the door open for extra easing at the September/October meetings.

In the US docket, the Chicago Fed index is due seconded by the Dallas Fed manufacturing gauge and July’s Durable Goods Orders.

What to look for around USD

Increasing concerns over the US-China trade war and its negative spillover effects on the global growth prospects hurt the Greenback on Friday and dragged US yields to fresh lows. The US-China headlines eclipsed the speech by Fed’s Powell at the Jackson Hole Symposium, where he hinted at a potential rate cut in September or October. Although he did not unveil any reaction function regarding the interest rate path for the upcoming months, he did reiterate that the Fed ‘will act as appropriate to sustain the expansion’. On the positive side for the buck, Powell stressed the strength of the labour market and the US economy overall and expects inflation to gradually approach the Fed’s target.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.42% at 97.67 and faces the next up barrier at 9790 (21-day SMA) seconded by 98.45 (high Aug.23) and then 98.93 (2019 high Aug.1). On the other hand, a break below 97.17 (low Aug.23) would aim for 97.00 (200-day SMA) and finally 96.67 (low Jul.18).