- DXY keeps the bearish note around 97.70.
- US-China-EU trade concerns drag US yields lower.
- ISM Non-Manufacturing, ADP, Payrolls next of relevance.
The greenback stays on the defensive so far on Tuesday and is challenging the area of 3-week lows near 97.70 when tracked by the US Dollar Index (DXY).
US Dollar Index looks to trade and data
DXY has exacerbated the downside after breaking below the key support at 98.00 the figure, finding contention in the vicinity of 97.70 for the time being. It is worth mentioning that this area of support is also reinforced by the proximity of the critical 200-day SMA, today at 97.63. above this region, the constructive bias is expected to persist.
In the meantime, the index continues to suffer another bout of comments (tweets) by President Trump. Indeed, Trump hinted at the likeliness that any deal with China could have to wait until past the 2020 elections, while on the opposite side he appears to have left the door open for some negotiation regarding tariffs on EU products.
Absent significant releases in the US docket on Tuesday, the focus of attention is expected to remain on the trade front ahead of Wednesday’s USM Non-Manufacturing and the ADP report for the month of November.
What to look for around USD
DXY gave away gains on Monday and breached the 98.00 support in response to trade jitters and disappointing results from the US manufacturing sector. That said, any recovery is expected to hinge on developments from the US-China trade front as well as improvement in the US docket against the backdrop of the ‘wait-and-see’ stance from the Fed. On the broader view, however, the outlook on the greenback still looks constructive on the back of a cautious Fed vs. the broad-based dovish stance from its G10 peers, the ‘good shape’ of the US economy, the dollar’s safe haven appeal and its status of ‘global reserve currency’.
US Dollar Index relevant levels
At the moment, the pair is retreating 0.16% at 97.73 and faces the next support at 97.68 (low Nov.18) seconded by 97.63 (200-day SMA) and then 97.11 (monthly low Nov.1). On the flip side, a break above 98.12 (100-day SMA) would aim for 98.54 (monthly high Nov.29) and finally 99.25 (high Oct.8).