US Dollar Index flirts with the 21-day SMA near 97.60

The Greenback, when measured by the US Dollar Index (DXY), is extending the optimism in the first half of the week and navigates in the upper end of the range around 97.60.

US Dollar Index looks to trade, CPI

The index is up for the second session in a row so far on Tuesday, although it remains within the broader sideline theme following the rejection from new YTD peaks near 99.00 the figure recorded on August 1.

The recovery in the buck to the 97.60 region was in tandem with another downtick in US yields, where the 10-year benchmark dropped to the area of multi-year lows around 1.64%. As usual, trade concerns and the unabated ‘flight-to-safety’ continue to sustain the move lower in yields.

Later today, all the attention will be on the publication of inflation figures gauged by the CPI for the month of July, seconded by the NFIB index.

What to look for around USD

Geopolitical concerns (China-Hong Kong) plus usual jitters on the US-China trade war and the impact on the global growth keep the preference for safer assets well and sound for the time being. By the same token, yields of the US 10-year benchmark remain under intense downside pressure and navigate levels last seen three years ago. These rising trade concerns, while unabated and in combination with the current 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 0.20% at 97.58 and faces the next barrier at 97.85 (high Aug.7) seconded by 98.37 (monthly high May 23) and then 98.93 (2019 high Aug.1). On the downside, a break below 97.21 (low Aug.6) would open the door to 96.94 (200-day SMA) and then 96.67 (low Jul.18).