US Dollar Index cautious around 96.50 ahead of FOMC
|- The index looks for direction in the mid-96.00s.
- Yields of US 10-year note appear flat near 2.64%.
- FOMC minutes in centre stage later today.
The greenback, in terms of the US Dollar Index (DXY), is struggling for direction in the 96.50 region.
US Dollar Index focused on FOMC
The index remains under pressure following four consecutive sessions with losses, including new 2019 highs in the 97.40 region recorded on February 15.
The better tone in the risk-associated space in response to rising hopes of a US-China trade deal in combination with renewed optimism surrounding Brexit negotiations have been weighing on the buck, keeping its demand subdued since the start of the week.
Looking ahead, the FOMC minutes will be the salient event later in the day. All the attention will be on any hint of the timing of the end of the Fed’s balance sheet run off as well as the Committee’s views on the current guidance on rates and data dependency.
What to look for around USD
The US-China trade negotiations remain in centre stage and are expected to keep driving the sentiment for the time being. Investors will also look to the FOMC minutes, where the balance sheet and a re-assessment of the Fed’s tightening cycle will be in the centre of the debate. Despite market participants are holding on to the idea of a potential slowdown in the US economy in the next months, the deterioration in overseas fundamentals in combination with ‘softer’ stance in G10 central banks keeps occasional dips in the buck somewhat shallow.
US Dollar Index relevant levels
At the moment, the pair is advancing 0.03% at 96.56 facing the immediate hurdle at 97.37 (2019 high Feb.15) seconded by 97.71 (2018 high Dec.14) and then 97.87 (monthly high Jun.20 2017). On the other hand, a breach of 96.40 (55-day SMA) will target 96.33 (21-day SMA) en route to 95.56 (200-day SMA).
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