US Dollar Index eases from tops near 98.80 ahead of Fedspeak
|- DXY lost upside momentum above 98.80.
- US flash Manufacturing PMI surprised to the upside.
- Fed’s Williams, Daly and Bullard will speak later in the day.
The US Dollar Index (DXY), which gauges the Greenback vs. a bundle of its main rivals, has regained extra steam and tested tops in the 98.80/85 band, losing some impetus afterwards.
US Dollar Index now focused on Fedspeak
After climbing to fresh daily/weekly highs near 98.90, the index faced a bout of selling pressure, although it remains well into the positive territory at the time of writing.
The correction in the buck comes amidst some rangebound in yields of the key US 10-year note in sub-1.70% levels, the lower end of the recent range and around 20 bps from last week’s tops.
In the US docket, Markit’s preliminary gauge of the manufacturing PMI came in at 51.0 and 50.9 when comes to the services sector for the current month.
Later in the session, the Greenback is expected to remain in centre stage in light of speeches by New York Fed J.Williams (permanent voter, centrist), San Francisco Fed M.Daly (2021 voter, centrist) and St. Louis Fed J.Bullard (voter, dovish).
What to look for around USD
The index has been managing well to keep the trading range above the 98.00 barrier in past sessions. Market participants have already digested the recent FOMC event and appear to have shifted their focus to the US-China trade war once again. Domestic data in combination with politics 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. However, the increasing dissent among FOMC members casts further clouds on the probability of extra stimulus at the upcoming meetings, leaving the outlook on interest rates quite mixed, to say the least. 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 safe haven appeal and the status of ‘global reserve currency’.
US Dollar Index relevant levels
At the moment, the pair is gaining 0.22% at 98.68 and 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). On the downside, immediate contention emerges at 97.86 (monthly low Sep.13) followed by 97.61 (100-day SMA) and finally 97.17 (low Aug.23).
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