US Dollar Index challenges 2-day highs near 96.30

  • DXY adds to Tuesday’s gains beyond 96.00 the figure.
  • Yields of the US 10-year note rebound from 1.99%.
  • US Durable Goods Orders, Trade Balance figures next on tap.

The greenback, in terms of the US Dollar Index (DXY), is extending the rebound from recent lows further north of the key barrier at 96.00.

US Dollar Index looks to data, yields

The index has managed to regain some shine following a less-dovish-than-expected comments from Chief J.Powell on Tuesday. In fact, Powell poured cold water over a potential rate cut (insurance cut?) in the near term, although he reiterated that the case for lower rates has strengthened in light of the trade uncertainty and global slowdown. He also ruled out that a rate cut was guaranteed, emphasizing the data-dependency from the Fed instead of reacting to short-term (temporary?) situations.

Somewhat reinforcing this view, St. Louis Fed J.Bullard (voter, dovish) talked down the probability of a 50 bps rate cut and instead advocated for a 25 bps cut.

The recovery in the buck comes in tandem with the rebound in yields of the US 10-year note on the back of easing US-China trade concerns, particularly in light of the potential Trump-Xi meeting at the G-20 event in Japan on June 28-29. Higher yields have also widened the spread vs. another G-10 peers, adding to the improved mood around the buck.

Today’s US docket brings in advanced Trade Balance figures, Durable Goods Orders, the EIA weekly report on US crude oil inventories and the speech by San Francisco Fed M.Daly (2021 voter, centrist) at the Forecasters Club of New York.

What to look for around USD

Speculations of a rate cut as early as the next meeting have lost traction in past hours after Fed’s Powell remove some tailwinds from that idea, although the case for lower rates in the near/medium term remains in place for the time being. The Fed is expected to keep the data-dependent stance intact while it continues to scrutinize the US-China trade situation and weakness overseas.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.12% at 96.29 and faces the next hurdle at 96.58 (200-day SMA) seconded by 97.36 (55-day SMA) and finally 97.77 (high Jun.18). On the other hand, a breach of 95.82 (low Feb.28) would open the door to 95.74 (low Mar.20) and then 95.16 (low Jan.31).

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