US Dollar Index stays side-lined near 99.70, looks to data, Powell

• DXY consolidates Monday’s losses around the 99.70/60 band.
• All the attention will be on the testimony by Fed’s Powell.
• The US docket includes housing data and Fedspeak.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, is alternating gains with losses on Tuesday around the 99.70 region.

US Dollar Index now focused on Powell

The index came under renewed and strong selling pressure at the beginning of the week, receding to fresh 3-day lows in sub-100 levels in response to an improved mood in the risk-associated universe.

Indeed, American biotech Moderna announced further progress in its development of a vaccine for the coronavirus following positive results from tests in 45 participants, all lending extra legs to the riskier assets.

In addition, at an interview with news channel CBS on Monday, Chief Powell stressed the economy could start its recovery in the second half of the year, although a full recovery could not be seen before the end of 2021. Powell also reiterated the Fed’s readiness to act in case of need, although he once again ruled out negative interest rates.

Later in the session, Fed’s Powell and Treasury Secretary S.Mnuchin will testify before the Senate Banking Committee, in what will be the salient event on Tuesday. In the calendar, Building Permits and Housing Starts are due along with the speech by Boston fed E.Rosengren (2022 voter, hawkish).

What to look for around USD

The greenback has started the week on a negative fashion, falling below the 100.00 mark on Monday on the back of the resumption of the risk-on sentiment in the global markets. In the meantime, the dollar remains vigilant on the US-China trade front and the gradual return to some normality in the US economy. On the constructive stance around the buck, it remains the safe haven of choice among investors, helped by its status of global reserve currency and store of value. The dollar also derived extra support after Fed’s J.Powell recently ruled out negative rates.

US Dollar Index relevant levels

At the moment, the index is gaining 0.05% at 99.67 and a break above 100.56 (monthly high May 14) would open the door to 100.93 (weekly/monthly high Apr.6) and finally 101.34 (monthly high Apr.10 2017). On the other hand, the next support is located at 99.52 (55-day SMA) followed by 99.12 (weekly low May 11) and then 98.57 (monthly low May 4).