US Dollar Index moves to multi-day highs near 97.70 post-data

  • The index targets higher levels around 97.70.
  • US Retail Sales missed expectations in April.
  • NY Empire State index surprised to the upside in May.

The greenback has reversed the initial bearish note and moves to the upper end of the weekly range near 97.70 when gauged by the US Dollar Index (DXY).

US Dollar Index bid on trade, data

The index gathers extra steam following the continuation of the risk-off trade in the global markets, where the US-China trade war remains in centre stage and yields of the key US 10-year note have plummeted to sub-2.38% levels, levels last seen in late March.

Mixed results from the US docket has also lent further legs to the recovery in the buck, with the NY Empire State index coming in at 17.80 for the current month, bettering estimates. On the softer side, headline Retail Sales contracted at a monthly 0.2% during last month.

Additional data saw Industrial Production contracting at a monthly 0.5%, same result on Manufacturing Production and Capacity Utilization coming in at 77.9%, also below consensus.

Later in the session, the NAHB index is due seconded by Business Inventories, TIC Flows and speeches by FOMC’s R.Quarles (permanent voter, centrist) and Richmond Fed T.Barkin (2021 voter, centrist).

What to look for around USD

The centre of the debate for the greenback has shifted to the US-China trade dispute, although a high degree of uncertainty as well as caution among investors seem to prevail for the time being. On another direction, the lack of traction in US inflation – and concerns among Fed members – keeps weighing on the buck and threatens its underlying positive prospect. Occasional drops in the greenback, however, are seen shallow as the index stays supported by overseas weakness, the 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 gaining 0.16% at 68 and a breach 97.03 (low May 13) would expose 96.73 (100-day SMA) and finally 96.32 (200-day SMA). On the upside, the next up barrier is located at 98.10 (high May 3) seconded by 98.32 (2019 high Apr.25) and then 98.97 (78.6% Fibo of the 2017-2018 drop).

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