- The index loses further momentum near 97.90.
- Chicago Fed index came in on the soft side.
- Attention shifts to upcoming Fedspeak.
The greenback remains on the defensive so far on Monday, although the selling impetus appears to have met contention in the 97.90 area when gauges by the US Dollar Index (DXY).
US Dollar Index focused on Fedspeakers
The index is retreating after five consecutive daily advances, including fresh multi-week highs beyond the critical 98.00 the figure.
The mild pick up in the mood around the riskier assets has attracted USD-sellers to the markets, sponsoring the ongoing knee-jerk amidst the lack of fresh developments in the trade front.
In the calendar, the Chicago Fed National Activity Index came in at -0.45 for the month of April, disappointing previous estimates and down from March’s 0.05.
Earlier in the session, Atlanta Fed R.Bostic (2021 voter, centrist) has ruled out a rate cut in the near term, adding that ongoing uncertainty on the trade front impacts on business investment.
Moving forward, Philly Fed P.Harker (2020 voter, hawkish) will speak on Management Science in Boston, while R.Clarida (permanent voter, dovish) and NY Fed J.Williams (permanent voter, centrist) will participate in the ‘Fed Listens’ Event in New York. Later, Chief J.Powell will speak at the Atlanta Fed Financial Markets Conference.
What to look for around USD
With the US-China trade talks mired in the mud for the time being, investors’ attention have now shifted to the Chinese government and the likeliness of intervention in the Yuan, as the currency slowly approaches the psychological 7.00 mark without any progress in the negotiations, at least in the short-term horizon. On another direction, inflation figures remain in the centre of the debate among Fed members despite the solid labour market and healthy fundamentals, preventing the Fed from fully ruling out a rate hike later in the year. The positive outlook on the buck, however, stays unchanged and sustained by overseas weakness, its safe haven appeal, favourable yield spreads vs. the Fed’s G10 peers and the status of global reserve currency.
US Dollar Index relevant levels
At the moment, the pair is losing 0.04% at 97.98 and a break below 97.67 (21-day SMA) would open the door for 97.21 (55-day SMA) and then 97.03 (low May 13). On the flip side, immediate resistance comes in at 98.10 (high May 3) seconded by 98.32 (2019 high Apr.25) and finally 98.97 (78.6% Fibo of the 2017-2018 drop).
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