- DXY starts the week on a firm note near 98.50.
- Euphoria after the US-China partial trade deal loses traction.
- Retail Sales, Philly Fed index next on the weekly docket.
The US Dollar Index (DXY), which gauges the Greenback vs. a bundle of its main competitors, is trading on a firm footing on Monday and it has already regained the 98.50 region.
US Dollar Index focused on trade, data
The index has managed to reverse the recent 3-day correction lower to the 98.20 region following Monday’s renewed selling bias in some of its rivals, namely EUR and GBP.
Despite the recent partial trade agreement between the US and China, scepticism remains high among investors, many of them still putting to the debate the real sustainability of such an event in the future.
Later in the week, the focus of attention will be on US data releases: Retail Sales, the Beige Book and the Philly Fed Manufacturing Index.
What to look for around USD
The decline in DXY appears to have found support near 98.30 so far, although the Greenback is expected to remain under pressure this week in response to the prevailing risk-on sentiment. Investors’ attention now shifted to the increasing likeliness of another insurance cut by the Fed at the next meeting and its recently announced programme to expand the balance sheet via purchases of T-bills to remove pressure from the money markets. Despite evidence that the US economy could be losing some momentum, the labour market remains strong as well as consumer spending, although the latest mixed results from the CPI appear to support the view of extra cuts by the Fed in the near future. 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 0.16% at 98.49 and a breakout of 98.78 (21-day SMA) would open the door to 99.25 (high Oct.9) and then 99.67 (2019 high Oct.1). On the other hand, the next support emerges at 98.20 (monthly low Oct.11) seconded by 97.86 (monthly low Sep.13) and then 97.80 (100-day SMA).
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