US Dollar Index weaker, extends the leg lower to 98.20

  • DXY trades on the defensive in the 98.20 region.
  • Yields of the US 10-year note met support near 1.75%.
  • Fed’s E.Rosengren speaks later in the day.

The selling mood persists around the Greenback at the end of the week and is now dragging the US Dollar Index (DXY) to session lows near 98.20.

US Dollar Index grinds lower post-FOMC

The index is down for the second session in a row on Friday, returning to the low-98.00s in tandem with declining US yields and amidst cautious optimism surrounding US-China trade talks.

In fact, officials from both countries are expected to meet again today in order to lay the groundwork for more relevant negotiations at the beginning of October.

Further out, another repo operation is expected by the New York Fed later today against the backdrop of persistent funding stress in the US money markets.

In the docket, Boston Fed E.Rosengren (voter, centrist) will speak at an event in New York.

What to look for around USD

DXY keeps the trade within range so far while markets digest the FOMC event and assess another rate cut under the ‘mid-cycle adjustment’. Domestic data in combination of political and trade developments should be key in determining the next decision on rates after Fed’s Powell left the door open for extra easing along the road. Looking at the broader picture, the positive view on the Dollar is still well underpinned by the solid US labour market, strong consumer confidence and spending and the auspicious pick up in consumer prices, all adding to the buck’s safe haven appeal and the status of ‘global reserve currency’. Against this backdrop, the slowdown persists in overseas economies while central banks stick to a more aggressive dovish bias. 

US Dollar Index relevant levels

At the moment, the pair is losing 0.15% at 98.22 and faces immediate contention at 97.86 (monthly low Sep.13) followed by 97.60 (100-day SMA) and finally 97.17 (low Aug.23). On the upside, a break above 99.10 (high Sep.12) would aim for 99.37 (2019 high Sep.3) and then 99.89 (monthly high May 11 2017).

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