US Dollar Index looks volatile below 98.00, attention stays on trade

DXY remains parked around the 97.80/90 region.
Philly Fed index surprised to the upside this month.
US-China trade hopes appear reignited.

Pablo Piovano FXStreet

The US Dollar Index (DXY), which tracks the buck vs. a bundle of its main competitors, alternates gains with losses on Thursday around the 97.80/90 area.

US Dollar Index keeps focused on trade

The price action around the index remains quite volatile on Thursday, always gyrating around headlines from the US-China trade front.

Indeed, latest news indicated that the White House could delay tariffs that are meant to kick in next month, while US and Chinese officials could be planning the resumption of negotiations any time soon.

In the US data space, the key Philly Fed manufacturing gauge came in on the strong side in November, improving to 10.4 vs. forecasts at 7.0 and October’s 5.6. further data saw Initial Claims rising by 227K WoW, coming in short of expectations.

Later in the session, Existing Home Sales are due ahead of the speech by Minneapolis Fed N.Kashkari (2020 voter, dovish).

What to look for around USD

The index seems to have met solid contention in the 97.70 region for the time being. In the meantime, headlines from the US-China trade dispute are expected to remain as the exclusive driver when comes to price action in the global markets, while investors keep monitoring US fundamentals amidst the ‘wait-and-see’ stance from the Federal Reserve and the steepening of the 2y-10y yield curve seen as of late. Moving to US politics, markets keep ignoring developments from the Trump’s impeachment process, while the impact on the FX space remains muted so far. On the broader view, however, the outlook on the greenback still looks constructive on the back of the Fed’s ‘wait-and-see’ mode vs. the dovish stance from its G10 peers, the dollar’s safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is advancing 0.01% at 97.88 a breakout of 98.45 (monthly high Nov.13) would open the door to 99.25 (high Oct.8) and then 99.67 (2019 high Oct.1). On the other hand, immediate contention is located at 97.68 (monthly low Nov.18) seconded by 97.56 (200-day SMA) and finally 97.11 (monthly low Nov.1).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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