US Dollar Index eases from tops, back to 98.30 on China headlines

  • DXY recedes from earlier tops in the 98.45/50 band.
  • China announced tariffs on imports of US oil.
  • Fed’s Powell in centre stage later in the day.

The Greenback, in terms of the US Dollar Index (DXY), has retreated from the area of weekly highs near 98.50 following fresh Chinese headlines.

US Dollar Index now focused on trade, Powell

The index manages well to keep the positive note after China said it will impose 5% tariffs on US oil imports from September 1. China will also levy tariffs on US products worth around $75 billion and it will resume 25% tariffs on US autos from December 15.

The buck has also lost part of its shine today after St. Louis Fed J.Bullard (mega-dovish, voter) advocated for lower rates in order to clinch the inflation target and in response to the inverted yield curve. Bullard also noted that the global contraction of the manufacturing sector is worrying. On maybe the only USD-supportive comment, Bullard reiterated that the labour market keeps doing well.

Later in the session, the speech by Chief J.Powell at the Jackson Hole Symposium will be the most salient event. In the docket, the US housing sector will be again in the limelight following the release of New Home Sales for the month of July.

What to look for around USD

The main focus this week will be on the Jackson Hole Symposium as well as on any hint on the Fed’s plan for the next months regarding interest rates and the outlook of the US economy. In the meantime, trade concerns, while still unabated and in combination with the 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 gaining 0.11% at 98.32 and faces the next up barrier at 98.45 (high Aug.23) followed by 98.93 (2019 high Aug.1) and the 99.89 (monthly high May 2017). On the other hand, a break below 97.95 (low Aug.21) would aim for 97.21 (low Aug.6) and then 96.99 (200-day SMA).

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