US Dollar Index weaker, tumbles to the 97.40 region

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  • DXY loses further ground and threatens the 200-day SMA.
  • US 10-year yields met resistance at 1.78%.
  • Extra gains in EUR/USD drags the Greenback lower.

Tracked by the US Dollar Index (DXY), the Greenback continues to lose ground and is now challenging the vicinity of the critical support at the 200-day SMA below 97.40.

US Dollar Index now focused on the 200-day SMA

The index is losing ground since Tuesday and the downside has been nothing but exacerbated after the UK and the EU clinched a Brexit deal on Thursday, giving extra wings to the rest of the risk-associated universe.

Poor data releases in the US docket this week (Industrial/Manufacturing Production, Philly Fed, Housing Starts) have also collaborated with the renewed and quite strong bearish sentiment surrounding the buck, which is now navigating the boundaries of the critical 200-day SMA below 97.40.

Nothing scheduled in the US docket today will prevent the index to go further south on negative surprises at least. Moving forward, speeches by Dallas Fed R.Kaplan (2020 voter, dovish), Kansas City Fed E.George (voter, hawkish) and FOMC’s R.Clarida (permanent voter, dovish) should keep USD-traders entertained for the rest of the day.

What to look for around USD

DXY remains entrenched in the lower bound of the range and is now putting the key 200-day SMA to the test amidst persistent scepticism on the US-China trade front and upbeat mood in the riskier assets following the Brexit deal. In the meantime, investors’ attention has now shifted to the increasing likeliness of another insurance cut by the Fed at the October meeting amidst some loss of momentum in the US economy, particularly after recent figures from the manufacturing sector, mixed inflation results and some slowdown in consumer spending. 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 losing 0.14% at 97.43 and faces the next support at 97.37 (200-day SMA) seconded by 97.17 (low Aug.23) and the 97.03 (monthly low Aug.9). On the upside, a breakout of 98.34 (55-day SMA) would open the door to 98.68 (21-day SMA) and finally 99.25 (high Oct.9).

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