US Dollar Index little changed near 99.00, looks to CPI, trade

  • DXY keeps the tight range around the 99.00 area.
  • US CPI, Initial Claims next on the docket.
  • All the attention on US-China trade talks.

The Greenback alternates gains with losses in the second half of the week around the 99.00 neighbourhood when measured by the US Dollar Index (DXY).

US Dollar Index focused on data, trade talks

The index remains unable to resume the upside on a sustainable fashion on Thursday and keeps navigating instead a sideline theme with weekly resistance in the 99.20/25 band.

Rising optimism on a positive outcome at the US-China trade talks starting today have prompted a moderate rebound in US yields, accompanying the up move in the Greenback.

At his speech on Wednesday, Chief Powell reiterated the economy is in a ‘good place’ and defended the policies implemented by the Federal Reserve so far. Further out, minutes from the latest Fed meeting signaled a majority of members favoured a 25 bps rate cut while concerns over trade tensions, geopolitics and the global economy persist.

In the US data universe, September’s CPI is seen at 1.8% YoY (vs. 1.7% in August) while Initial Claims are seen rising by 219K during last week. In addition, Cleveland Fed L.Mester (2020 voter, hawkish) will speak at John Carroll University.

What to look for around USD

The Greenback has started the week on a better mood and it has managed to regain the 99.00 neighbourhood. Renewed US recession jitters and Fed easing chatter weighed on the buck during last week, particularly 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 resumption of US-China high-level trade talks starting today in Washington. 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 0.10% at 99.01 and faces the next support at 98.78 (21-day SMA) seconded by 98.64 (monthly low Oct.3) and then 98.36 (55-day SMA). 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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