US Dollar Index around 99.50 ahead of key data, new 2019 highs

The Greenback, when tracked by the US Dollar Index (DXY), keeps the rally well and sound and is now navigating the area of new YTD highs in the mid-99.00s.

US Dollar Index firmer, looks to data

The index is extending the auspicious start of the week, moving further north of the 99.00 barrier and managing to record fresh 2019 highs in the 99.50 region, area last visited in May 2017.

Increasing weakness in the Dollar’s competitors, such as EUR and JPY, has given extra wings to the upside in the buck in past sessions, while yields of the key US 10-year reference have been trading within familiar ranges vs. declining yields in their European peers.

Adding to the better mood in the riskier assets, the White House has talked down the possibility that Chinese companies could be delisted from US markets and that US investments in China could face limitations.

Later in the session, the key ISM manufacturing for the month of August will be the salient release. In addition, Chicago Fed C.Evans (voter, centrist) will speak at a Bundesbank event in Frankfurt, FOMC’s R.Clarida (permanent voter, dovish) will give remarks at an AI Conference and FOMC’s M.Bowman (permanent voter, centrist) speaks at a Community Banking Conference.

What to look for around USD

The index remains firm and it has extended the up move beyond 99.50 so far this week, recording a the same time fresh 2019 highs. Sentiment around the buck stays strong amidst a divided FOMC vs. a broad-based dovish stance from the rest of the G-10 central banks. In spite of some key fundamentals appear to have run out of steam in past months, the labour market remains strong as well as consumer spending, while the recent pick up in inflation adds to the auspicious domestic scenario vs. the generalized slowdown in most of overseas economies. Domestic data in combination with politics and developments from the US-China trade front should be key in determining the next decision on interest rates amidst Powell’s ‘mid-term adjustment’. Looking at the broader picture, the positive view on the Dollar is also well underpinned by its safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.08% at 99.48 and a breakout of 99.51 (yearly high Oct.1) would aim for 99.89 (monthly high May 11 2017) and then 100.00 (psychological handle). On the downside, immediate contention emerges at 98.60 (21-day SMA) seconded by 98.16 (55-day SMA) and finally 97.86 (monthly low Sep.13).