US Dollar Index falters ahead of the 55-day SMA near 97.60

  • The upside in DXY run out of steam near 97.60.
  • US CPI disappointed expectations last month.
  • Speeches by FOMC’s Williams and George coming up next.

The greenback, when measured by the US Dollar Index (DXY), has once again failed to surpass recent tops in the vicinity of 97.60, coincident with the 55-day SMA.

US Dollar Index up post-CPI results

The index is extending the weekly upside for the second session in a row on Tuesday amidst the prevailing risk-on tone and despite poor results from the domestic docket and declining US yields.

Indeed, the greenback managed to fade the initial pessimism and regained poise despite US inflation figures came in on the soft side for the month of December. Furthermore, headline CPI rose 0.2% MoM and 2.3% on an annualized basis, while Core CPI gained 0.1% inter-month and 2.3% on a yearly view. Earlier in the session, the NFIB index also surprised to the downside, dropping to 102.7 during last month.

The firm note in the buck remains despite yields of the key US 10-year note have lost the grip and are now challenging the 1.82% level, down around 4 bps from earlier tops.

Later in the day, NY Fed J.Williams (permanent voter, centrist) will discuss Behavioural Science in London and Kansas City Fed E.George (2022 voter, hawkish) speaks at an event in KC.

What to look for around USD

The index has started the week on a mild positive tone following last week’s new 2020 highs and despite the latest Payrolls figures disappointed expectations. In the meantime, all the attention has now shifted to the imminent sign of the ‘Phase One’ deal with China while tensions on the US-Iran front continues to evaporate. So far, the recovery in the greenback continues to target the key 200-day SMA in the 97.70 region. Above this level, DXY should regain the constructive view, always underpinned by the so far ‘wait-and-see’ stance from the Fed vs. the broad-based dovish view from its G10 peers, the dollar’s safe haven appeal and its status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the index is gaining 0.06% at 97.43 and a breakout of 97.58 (2020 high Jan.9) would open the door to 97.69 (200-day SMA) and finally 97.87 (61.8% Fibo of the 2017-2018 drop). On the other hand, initial contention is expected at 97.19 (21-day SMA) seconded by 96.36 (monthly low Dec.31) and finally 96.04 (50% Fibo of the 2017-2018 drop).

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