US Dollar Index looks to stabilize near 98.70, focus remains on trade

  • DXY stays sidelined in the 98.70/60 band so far.
  • Yields of the US 10-year note approach 1.70%.
  • US Export/Import Prices, advanced U-Mich next on the docket.

The US Dollar Index (DXY), which tracks the Greenback vs. a bundle of its main rivals, remains under pressure and navigates the 98.70/60 range ahead of the opening bell in Euroland on Friday.

US Dollar Index focused on trade

The index is trading in the area of 2-week lows around 98.70 after breaking below the key support at 99.00 the figure on Thursday. Renewed strength in rival currencies such as EUR and GBP forced the buck to give further ground as of late.

The moderate down move in the buck came along a sharp rebound in US yields following the somewhat constructive tone from the first day of US-China trade talks. In this regard, President Trump is expected to meet China’s Liew He later today.

In the US docket, Import and Export Prices are due seconded by the advanced gauge of the US Consumer Sentiment for the current month. In addition, Minneapolis Fed N.Kashkari (2020 voter, dovish) will participate in a Q&A session on Economy in New York, Boston Fed E.Rosengren (voter, hawkish) will speak at an event in Wisconsin and Dallas Fed R.Kaplan (2020 voter, hawkish) speaks at an event in San Francisco.

What to look for around USD

The Greenback came under further pressure this week and receded to the region of 2-week lows in sub-99.00 levels tracking the renewed optimism surrounding the US-China trade talks and the rebound in US yields. 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 insurance 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 0.06% at 98.63 and faces the next support at 98.37 (55-day SMA) seconded by 97.86 (monthly low Sep.13) and then 97.79 (100-day SMA). On the upside, a breakout of 99.25 (high Oct.9) would open the door to 99.67 (yearly high Oct.1) and finally 99.89 (monthly high May 11 2017).

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