US Dollar Index looks cautious around 97.20, US data eyed

The greenback, when measured by the US Dollar Index (DXY), is trading without a clear direction in the second half of the week around the 97.20 area.

US Dollar Index now focused on data

The index is struggling for direction in the lower end of the weekly range as market participants continue to digest Wednesday’s pullback to the 97.20/15 band, area coincident with the 10-day SMA.

The dollar stayed mostly offered on Wednesday in light of the largely anticipated signing of the US-China’s ‘Phase 1’ trade deal, which includes intellectual property, tech transfer, currency and financial services. In addition, China pledged to buy extra US goods worth around $200 billions over the next couple of years and halt persistent interventions in the FX markets.

The US docket looks pretty interesting today, with Retail Sales taking centre stage along with the Philly Fed manufacturing index, usual Claims, Business Inventories, the NAHB index and TIC flows.

What to look for around USD

The upside momentum in DXY has so far met interesting resistance in the area of yearly highs around 97.60, while further downside emerged after the US-China trade deal was signed. In the meantime, investors are now looking to domestic data releases for direction in the near-term and any bullish attempt in the buck should initially target the key 200-day SMA in the 97.70 region. Above this level, DXY should regain the constructive view, always underpinned by the current ‘wait-and-see’ stance from the Fed (confirmed once again at the latest FOMC minutes) 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 up 0.01% at 97.22 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 emerges at 97.16 (weekly low Jan.15) followed by 96.36 (monthly low Dec.31) and finally 96.04 (50% Fibo of the 2017-2018 drop).