US Dollar Index testing the 10-day SMA beyond 97.80
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US Dollar Index testing the 10-day SMA beyond 97.80

  • The index extends the optimism above 97.80.
  • US 10-year yields hover around 2.31%.
  • US Consumer Confidence, S&P/C-S index coming up next.

The greenback keeps pushing higher in the first half of the week and is now flirting with the 10-day SMA in the 97.80/85 band, when measured by the US Dollar Index (DXY).

US Dollar Index looks to data, trade

The index is up for the second session in a row amidst persistent trade fears and the mild bias towards the risk-off trade, while US markets are slowing resuming the activity following Monday’s Memorial Day holiday.

In fact, trade concerns have resurfaced on Monday after President Trump hinted at the likeliness that further and higher tariffs could be in the pipeline, reiterating that there is no rush to clinch a deal with China.

In the US data space, house prices tracked by   the S&P/Case-Shiller index are due later in the NA session seconded by the more relevant Consumer Sentiment gauge by the Conference Board.

What to look for around USD

Recent poor prints in the US calendar triggered new concerns over the likeliness of a technical recession in the US economy in the next months and somewhat spooked USD-bulls. In the meantime, US-China trade negotiations remain mired in the mud and there is no solution on the horizon, at least in the near term. 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. That said, dips in DXY should remain somewhat shallow in combination with overseas weakness, the safe haven appeal of the buck, favourable US-G10 yield spreads and the Dollar’s status of global reserve currency.

US Dollar Index relevant levels

At the moment, the pair is advancing 0.07% at 97.80 facing the next resistance at 97.84 (10-day SMA/high May 28) followed by 98.37 (2019 high May 23) and finally 98.97 (78.6% Fibo of the 2017-2018 drop). On the other hand, a break below 97.55 (low May 27) would open the door for 97.29 (55-day SMA) and then 97.03 (low May 13).

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