- DXY remains within a tight range around 98.40.
- US-China recent partial agreement under scrutiny.
- NY Empire State Index, Fedspeak next on the calendar.
The Greenback, when gauged by the US Dollar Index (DXY), is struggling for direction around the 98.40 region at the end of the Asian trading session on Tuesday.
US Dollar Index focused on trade, data
The index regained some poise on Monday after bottoming out in the 98.20 region on Friday, or monthly lows.
In fact, the demand for the buck has picked up pace at the beginning of the week following some profit taking from investors in the risk-associated complex and renewed concerns on the recently clinched US-China partial trade deal, as investors remain largely skeptical regarding its real implementation. It is worth mentioning that another round of tariffs is due to kick in in mid-December.
The steady trade in the buck follows declining US yields, where the US 10-year benchmark is coming under some downside pressure after climbing beyond 1.75% in past sessions.
In the US docket, the only release of note later today will be the NY Empire State manufacturing gauge followed by speeches by Atlanta Fed R.Bostic (2021 voter, centrist), Kansas City Fed E.George (voter, hawkish) and San Francisco Fed M.Daly (2021 voter, centrist).
What to look for around USD
DXY has managed to rebound from recent lows in the 98.20 region amidst some fresh jitters on the US-China trade front. Investors’ attention have now shifted to the increasing likeliness of another insurance cut by the Fed at the next meeting and its recently announced programme to expand the balance sheet via purchases of T-bills to remove pressure from the money markets. Despite evidence that the US economy could be losing some momentum, the labour market remains strong as well as consumer spending, although the latest mixed results from the CPI appear to support the view of extra cuts by the Fed in the near future. 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 0.01% at 98.42 and faces immediate contention at 98.20 (monthly low Oct.11) seconded by 97.86 (monthly low Sep.13) and then 97.80 (100-day SMA). On the other hand, a break above 98.78 (21-day SMA) would open the door to 99.25 (high Oct.9) and then 99.67 (2019 high Oct.1).
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