US Dollar Index flirting with session tops near 96.60 ahead of ISM

The greenback, tracked by the US Dollar Index (DXY), has started the week on a positive footing and is now adding to recent gains in the 96.40 area.

US Dollar Index focused on trade, data

The index is trading on the upper end of the multi-session consolidative theme near 96.50, managing to overcome the key 200-hour SMA at 96.45 ahead of the more relevant 200-day SMA at 96.60.

The greenback gathered further traction after the US and China announced a trade truce at the G-20 event in Japan on Saturday, following the constructive meeting between presidents Trump and Xi Jingpin.

The positive news on the trade front lifted US yields and collaborated with the better mood around the buck. This is contemplated as a temporary ceasefire as many significant obstacles still remain, although both parties expressed their intentions to clinch a deal eventually.

Later in the NA session, the key ISM manufacturing will be in the limelight seconded by the final manufacturing gauge by Markit.

What to look for around USD

The ongoing risk-on mood in the global markets in response to the US-China trade truce appears to have trimmed speculations of a potential rate cut by the Fed at this month’s meeting, lending extra legs to USD. This view is also reinforced by recent speeches by Chief Powell and FOMC’s Bullard. The case, however, of lower rates in the near/medium term remains well in place for the time being, while the Fed is expected to keep the data-dependent stance intact and continue to scrutinize the US-China trade situation and weakness overseas.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.40% at 96.52 and faces the next hurdle at 96.60 (200-day SMA) seconded by 97.31 (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).