US Dollar Index anaemic around 96.80 on US PPI

  • DXY keeps the tight range well in place around 96.80 on Tuesday.
  • US 10-year yields tested the proximity of 2.18%.
  • US Producer Prices rose 0.1% inter-month in May.

The US Dollar Index (DXY), which tracks the greenback vs. a basket of its main rivals, keep the familiar range unchanged today around the 96.80 region.

US Dollar Index apathetic on data, Trump

The index is extending the rangebound theme prevailing since yesterday in the 96.80 area, in line with the generalized lack of direction in the global markets and a tepid bounce in the risk-on mood.

In addition, Producer Prices failed to ignite any noticeable reaction in the buck. In fact, headline Producer Prices rose 0.1% MoM and 1.8% on a year to May, while Core prices gained 0.2% inter-month and 2.3% on a yearly basis. Earlier in the day, the NFIB index rose to 105.0 in May, surpassing initial estimates.

Further news around the greenback saw President Trump once again tweeting against the current levels of the Fed Funds, deeming them as ‘way too high’.

What to look for around USD

Markets’ idea of a probable rate cut by the Federal Reserve in the near to medium term (insurance cut?) were boosted by the huge miss from the US labour market during May, exacerbating the selling bias in the buck. However, and in spite of the recent results, the labour market remains strong, wage growth keep pushing higher and the overall economy looks healthy - specially when we consider the weakness in overseas economies – all begging the question whether current speculations of rate cuts are not overdone. In addition, US-China trade jitters remain everything but abated so far, shifting the focus of attention to the upcoming G20 meeting in Japan, where the issue should take centre stage.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.01% at 96.78 and faces the next hurdle at 96.98 (100-day SMA) seconded by 97.41 (55-day SMA) and finally 97.87 (61.8% Fibo of the 2017-2018 drop). On the downside, a breakdown of 96.46 (low Jun.7) would open the door for 96.04 (50% Fibo of the 2017-2018 drop) and then 95.82 (low Feb.28).

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