US Dollar Index stays bid, upside lost momentum near 98.30
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US Dollar Index stays bid, upside lost momentum near 98.30

  • The upside in DXY failed ahead of 98.30 today.
  • Risk-off mood, trade dominates the sentiment.
  • Flash US PMIs, New Home Sales coming up next.

The greenback is now easing some ground after climbing to the vicinity of 98.30 earlier in the day when gauged by the US Dollar Index (DXY).

US Dollar Index now looks to data

In spite of the ongoing knee-jerk, the broader mood around the index remains constructive so far this week, always against the backdrop of persistent trade effervescence between China and the US.

The correction lower in the buck came in tandem with a moderate drop in yields of the US 10-year benchmark to fresh lows in sub-2.35% levels.

In the docket, Initial Claims bettered estimates, advancing at a weekly 211K and taking the 4-Week Average to 220.25K from 225.00K.

Later in the session, New Home Sales for the month of April are due seconded by preliminary readings of manufacturing and services PMI during the current month. In addition, Dallas fed R.Kaplan (dovish), San Francisco Fed M.Daly (centrist), Atlanta Fed R.Bostic (centrist) and Richmond Fed T.Barkin (centrist) will all participate in a discussion panel. All Fed speakers are non-voters this year.

What to look for around USD

With the US-China trade talks mired in the mud for the time being, investors’ attention have now shifted to the Chinese government and the likeliness of intervention in the Yuan, as the currency slowly approaches the psychological 7.00 mark without any progress in the negotiations, at least in the short-term horizon. On another direction, the FOMC minutes reinforced the ‘patient’ stance from the Federal Reserve and the ‘transitory’ lack of upside momentum in domestic inflation. In addition, the Committee ruled out rate cuts in the next months and left the door open for extra tightening if the economy evolves as planned. The positive outlook on the buck, in the meantime, stays unchanged and sustained by overseas weakness, its safe haven appeal, favourable yield spreads vs. the Fed’s G10 peers and the status of global reserve currency.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.10% at 98.18 and faces the next up barrier at 98.32 (2019 high Apr.25) seconded by 98.97 (78.6% Fibo of the 2017-2018 drop) and finally 99.89 (monthly high May 11 2017). On the other hand, a break below 97.73 (21-day SMA) would open the door for 97.28 (55-day SMA) and then 97.03 (low May 13).

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