US Dollar Index advances to weekly highs near 98.20
|- The index resumes the upside and targets 98.20.
- US 10-year yields drop and test the 2.38%.
- Fedspeak, Claims, Manufacturing PMI next of note in the docket.
The greenback, in terms of the US Dollar Index (DXY), is extending the up move beyond the 98.00 barrier, clinching at the same time fresh weekly highs.
US Dollar Index focused on Fedspeak, data
The index is posting gains for the third session in a row on Thursday, always on the back of simmering US-China trade concerns in spite of the absence of fresh news in past days.
The buck also met extra support after the FOMC minutes showed the Fed is firmly committed to its ‘patient’ stance, while the Committee did not even mention the probability of rate cuts and considered the lack of traction of consumer prices as transitory. Further out, member reiterated the monetary conditions could be tightened further in case the economy keeps the forecasted pace.
In the docket, the usual weekly report on the labour market is due seconded by advanced prints of manufacturing and services PMIs and New Home Sales. 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 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 0.07% at 98.16 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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