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  • DXY reverses the initial optimism and retreats from tops.
  • Yields of the US-10 year reference dropped below 1.75%.
  • Markets’ focus remains on Brexit and upcoming ECB event.

The US Dollar Index (DXY), which tracks the Greenback vs. a basket of its main rivals, is now losing the grip and returning to the mid-97.00s.

US Dollar Index looks to UK and ECB

After climbing to the 97.65/70 band earlier in the session, the index met some selling pressure and receded to the 97.50 region, although it manages well to keep the trade within the positive territory so far.

The Brexit front has deteriorated in past hours along with increasing speculations of early elections in the UK and even the resurgence of a probable ‘no deal’ outcome, all lending oxygen to the buck and bolstering the positive start of the week for the buck.

In addition, investors will close follow Thursday’s ECB meeting amidst increasing consensus for a dovish message from the Council.

In the US docket, MBA’s Mortgage Applications dropped nearly 12% WoW while the weekly report on US crude oil supplies by the EIA is due later in the NA session. Later in the week, Durable Goods Orders and advanced PMIs will keep all the attention around the Dollar.

What to look for around USD

The index managed to regain fresh buying impetus and clinch tops above 97.50 amidst rising scepticism on the US-China trade front and negative developments from the Brexit negotiations. In the meantime, investors’ attention has now shifted to the increasing likeliness of another insurance cut by the Fed at the October meeting amidst some loss of momentum in the US economy, particularly after recent figures from the manufacturing sector, mixed inflation results and some slowdown in consumer spending. On the broader view, the constructive outlook in DXY looks a bit damaged but it still is in play amidst a divided FOMC vs. a broad-based dovish stance from the rest of the G-10 central banks. In addition, the positive view on USD remains well sustained by its safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.04% at 97.56 and a breakout of 97.65 (high Oct.23) would open the door to 97.80 (100-day SMA) and finally 99.25 (high Oct.9). On the flip side, the next support lines up at 97.14 (monthly low Oct.18) seconded by 97.03 (monthly low Aug.9) and then 96.67 (low Jul.18).