US Dollar consolidates losses around 98.80

Eren Sengezer FXStreet

After erasing most of its weekly gains on Friday, the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, extended its losses on Monday and broke below the 99 handle as the greenback struggled to find demand amid weakening expectations of the Fed going for another rate hike in June.

The CME Group FedWatch Tool shows that the markets are pricing a 73.8% chance of a rate hike in June. This probability fell below the 70% mark in the first couple of hours of the NA session as the survey results released by the Federal Reserve Bank of New York showed that the manufacturing sector in the area contracted. However, both the 2 and the 10-year U.S. Treasury bond yields are holding on to their daily gains, providing support for the greenback, and allowing the rate hike probability to rise once again.

Also, The National Association of Home Builders and Wells Fargo's index of home builders reached its highest level since 2005 at 71 on Monday, further helping the greenback limit its losses. As of writing, the index was at 98.77, still down 0.28% on the day.

Technical outlook

If the index faces a renewed selling pressure and falls below its session low of 98.67, it could aim for 98.35 (May 8 low) ahead of 98 (psychological level) and 97.60 (Nov. 1 low). To the upside, resistances align at 99 (psychological level), 99.60 (May 12 high) and 100 (psychological level).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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