US Dollar Index directionless, parked near 98.80

  • DXY hovers around the 98.80/85 band on Monday.
  • Markets continue to digest Friday’s Payrolls figures.
  • Focus is back to US-China trade talks (Thursday and Friday).

The Greenback, in terms of the US Dollar Index (DXY), is trading within a tight range in the 98.80 region at the beginning of the week.

US Dollar Index looks to data, trade

The index keeps orbiting around Friday’s close in the 98.80 region, as market participants continue to adjust to the recently published Payrolls figures for the month of September.

In fact, it is worth recalling that the unemployment rate dropped to 3.5% during last month, the lowest level in the last 50 years. In addition, the job creation came in a tad below estimates at 136K while wage inflation pressure ebbed somewhat. Despite the mixed tone from the report, it was not as bad as expected according to previous estimates, showing that the labour market remains strong although losing some momentum.

Nothing scheduled data wise today, while the attention will be on a couple of speeches by Chief Powell, the FOMC minutes and the publication of inflation figures tracked by the CPI.

What to look for around USD

The Greenback came under further selling pressure during last week, motivating DXY to extend the rejection from 2019 highs near 99.70 recorded on October 1st. Renewed recession jitters and Fed easing chatter kept weighing on the buck after the awful prints from the ISM gauges and the mixed employment report for the month of September. In the very near term, investors’ focus will be on the FOMC minutes (Wednesday) and US-China trade talks (Thursday and Friday). Despite evidence that the US economy could be losing some momentum, 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. On the broader view, the constructive outlook in DXY looks a bit damaged but it still is in play amidst a divided FOMC vs. a broad-based dovish stance from the rest of the G-10 central banks. In addition, the positive view on USD remains well sustained by its safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is losing 0.01% at 98.83 and faces the next support at 98.67 (21-day SMA) seconded by 98.28 (55-day SMA) and finally 97.86 (monthly low Sep.13). On the upside, a breakout of 99.67 (yearly high Oct.1) would aim for 99.89 (monthly high May 11 2017) and then 100.00 (psychological handle).

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