US Dollar Index bounces off lows, looks to regain 97.00

  • The index alternates gains with losses near 97.00.
  • Yields of the US 10-year note remain below 2.5%.
  • US Producer Prices, Initial Claims next on the docket.

The greenback, in terms of the US Dollar Index (DXY), has managed to regain some composure and is now approaching the key barrier at 97.00 the figure.

US Dollar Index focused on upcoming data

After three consecutive daily pullbacks, the index is now showing some signs of life and it is flirting with another move to the 97.00 neighbourhood.

The mixed tone from the FOMC minutes on Wednesday forced the buck to give away part of the ground gained in response to the dovish tone at the ECB event and its impact on EUR/USD.

According to yesterday’s minutes, members of the Committee did not discuss the probability of rate cuts at the latest meeting, although ‘several’ members see the policy could swing in either direction and ‘some’ members favoured higher rates in the next move by the Fed.

In the US data space, the usual weekly report on the labour market is due along with Producer Prices for the month of March. In addition, Fed speakers will also keep the attention around the buck later in the day: VP R.Clarida (permanent voter, dovish) will speak at the Annual IIF Meeting in Washington, St. Louis Fed J.Bullard (voter, dovish) speaks on ‘Economy and Monetary Policy’, Governor R.Quarles (permanent voter, hawkish) will participate in a FSB Roundtable, Minneapolis Fed N.Kashkari (non-voter, dovish) will hold a Q&A session via Twitter and Governor M.Bowman (permanent voter, centrist) will speak on ‘Community Banking’.

What to look for around USD

DXY keeps tracking the broad risk appetite trends while headlines coming from the US-China/US-EU trade fronts also collaborate with the price action. The recent mixed views from the FOMC minutes reinforce the neutral stance of the Fed in the next months, although a rate raise has not been ruled out just yet. On the greenback’s positive side we find solid US fundamentals, its safe haven appeal, favourable yield spreads vs. its peers and the status of global reserve currency. This, plus the Fed’s neutral/bullish prospects of monetary policy vs. the dovish shift seen in its G10 peers are expected to keep occasional dips in the buck shallow for the time being.

US Dollar Index relevant levels

At the moment, the pair is retreating 0.04% at 96.88 and faces initial contention at 96.85 (low Apr.10) seconded by 96.62 (55-day SMA) and finally 95.74 (low Mar.20). On the other hand, a break above 97.52 (high Apr.2) would expose 97.71 (2019 high Mar.7) and finally 97.87 (monthly high Jun.20 2017).

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