US Dollar Index advances to the 97.20 region

  • DXY adds to Friday’s gains above the 97.00 handle.
  • Yields of t he US 10-year note hover around 2.05%.
  • Chicago Fed Activity index will be the sole release today.

The greenback is extending the positive momentum at the beginning of the week above the key barrier at 97.00 the figure when gauged by the US Dollar Index (DXY).

US Dollar Index looks to geopolitics, Fed

The index has started the week on a positive footing, up for the second day in a row and recovering further ground following last Thursday’s deep sell-off. It is worth recalling that the greenback suffered the recent dovish comments from NY Fed J.Williams, who advocated for a large rate cut later in the month.

However, the pullback in the buck met contention in the vicinity of the 200-day SMA once again, where buying interest turned up after FOMC’s Bullard suggested a 25 bps rate cut should be appropriate while Boston Fed Rosengren said he does not see a scenario of lower rates.

In addition, the positive advanced print from the U-Mich index on Friday pointed to solid consumer spending going forward and also lent further legs to the greenback.

Moving forward, the Chicago Fed Activity index will be the sole release in an otherwise empty docket and ahead of key Q2 GDP results scheduled for later in the week.

What to look for around USD

Speculations among investors have already priced in a 25 bps rate cut hits month, although a bigger rate cut still remains in the centre of the debate. Trade tensions, geopolitical jitters around the US and Iran and global growth concerns continue to cloud the US outlook while the lack of upside traction in inflation remains worrisome. Confronting this scenario, the greenback still looks underpinned by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals when compared to its G10 peers and the shift to a more accommodative stance from the rest of the central banks.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.13% at 97.20 and faces the next resistance at 97.59 (high Jul.9) followed by 97.80 (monthly high Jun.3) and finally 98.37 (2019 high May 23). On the flip side, a break below 96.67 (low Jul.18) would aim for 96.46 (low Jun.7) and then 96.04 (50% Fibo of the 2017-2018 drop).

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