US Dollar Index back below 98.00 ahead of data

  • DXY clinched tops beyond the 98.00 handle in early trade.
  • Yields of the US 10-year note slipped back below 1.55%.
  • Busy US docket includes: Retail Sales, Philly index, Empire State gauge.

The Greenback, in terms of the US Dollar Index (DXY), is now giving away some gains and returns to sub-98.00 levels ahead of the opening bell in Europe.

US Dollar Index focused on yields, data

The index is now exchanging gains with losses after briefly breaking above the critical barrier at 98.00 the figure late on Wednesday, recording new weekly peaks at the same time.

The Greenback managed to generate upside traction amidst increasing concerns among investors on the likelihood that a recession could hit the US economy in the medium term, all after the 2y-10y yield curve inverted yesterday for the first time since 2007.

The sharp fall in US yields saw the 10-year reference trading in sub-1.55% levels, area last visited more than three years ago.

Busy day data wise today, with Retail Sales being the salient event seconded by the Philly Fed index, the NY Empire State gauge, usual Claims, the NAHB index, Industrial Production and TIC Flows.

What to look for around USD

Alleviated jitters on the US-China trade war and the likeliness of the continuation of talks between both parties in the near term gave renewed support to the index in past hours. By the same token, yields of the US 10-year benchmark have resumed the downside and sunk to new multi-year lows. These trade concerns, while unabated and in combination with the current inversion of the yield curve, carry the potential to spark further ‘insurance cuts’ by the Federal Reserve and thus undermine the constructive prospects of the buck in the next months. Opposed to this view emerges the Greenback’s safe have appeal, the status of ‘global reserve currency’, so far solid US fundamentals vs. overseas economies and the less dovish stance from the Federal Reserve (as per the latest FOMC event).

US Dollar Index relevant levels

At the moment, the pair is losing 0.03% at 97.92 and a breakdown of 97.69 (21-day SMA) would aim for 97.21 (low Aug.6) and then 96.96 (200-day SMA). On the other hand, the next up barrier emerges at 98.05 (high Aug.14) seconded by 98.37 (monthly high May 23) and then 98.93 (2019 high Aug.1).

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