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  • DXY navigates without direction around the 8.00 handle.
  • Yields of the US 10-year note gyrate around 2.05%.
  • ADP report, FOMC meeting coming up next in the docket.

The greenback, in terms of the US Dollar Index (DXY), has retreated from the area of 2-month highs and returned to the vicinity of the 98.00 handle.

US Dollar Index focused on data, FOMC

After moving to the 98.20 region on Tuesday, or fresh 2-month tops, the index lost some upside momentum amidst increasing cautiousness among market participants ahead of the key FOMC event later today.

DXY is holding on to the 98.00 neighbourhood following expectations of a 25 bps interest rate cut by the Federal Reserve later today (‘insurance cut’). Diminishing bets of a larger rate cut along with auspicious prints from the US docket have been sustaining the rally in the buck from the 95.90/85 band recorded in late June.

Also bolstering the upbeat sentiment, yesterday the US Consumer Confidence climbed to yearly highs at 135.7 in combination with a better-than-expected reading from Pending Home Sales and mixed results from Core PCE for the month of June.

Later in the day, then, the ADP report will be the salient event early in the NA session seconded by the Chicago PMI, all ahead of the FOMC meeting.

What to look for around USD

Investors have already priced in a 25 bps interest rate cut this month, while a larger rate cut is now practically off the table following recent positive developments from US fundamentals. Trade talks are back to the fore in light of this week’s meeting in China, although significant progress in the negotiations is expected to remain absent for the time being. The demand for the greenback, in the meantime, stays underpinned by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals and the broad-based shift to a more accommodative stance from the rest of the G-10 central banks.

US Dollar Index relevant levels

At the moment, the pair is losing 0.04% at 98.04 and a breakdown of 97.63 (10-day SMA) would open the door to 96.89 (200-day SMA) and then 96.67 (low Jul.18). On the flip side, the next up barrier aligns at 98.21 (monthly high Jul.30) seconded by 98.33 (monthly high Apr.23) and finally 98.37 (2019 high May 23).