US Dollar Index parked below 98.00, focus on FOMC, data

  • DXY remains within a tight range near 97.70.
  • US 10-year yields climb above 1.85%.
  • US trade deficit shrunk to $70.39 billion in September.

The US Dollar Index (DXY), which tracks the buck vs. a bundle of its main rivals, remains on the defensive around the 97.70 region, a tad below recent peaks.

US Dollar Index focused on Fed, data

The index met strong resistance in the vicinity of 97.90 during early trade, area coincident with a Fibo retracement of the 2017-2018 down move and is looking to stabilize around those levels.

The Greenback came under some renewed selling pressure at the beginning of the week in response to a pick up in the sentiment surrounding the riskier assets on auspicious Brexit headlines, lifting GBP, EUR and US yields.

In the US data space, September’s trade deficit narrowed to $70.39 billion while the Chicago Fed index dropped to -0.45 for the same period.

Later in the week, the FOMC event is expected to grab all the attention on Wednesday, ahead of Friday’s Non-farm Payrolls and the ISM Manufacturing.

What to look for around USD

The index managed to regain fresh buying impetus and advanced to peaks near the 98.00 handle. Rising scepticism on the US-China trade front and worsening conditions in the Brexit process as well as the looser ECB stance are seen as key drivers for the price action for the time being, while market participants have already priced in another ‘insurance’ cut by the Fed at its meeting on Wednesday in response to persistent signs that the US economy is running out of steam somewhat. 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, the Dollar’s safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is losing 0.08% at 97.75 and faces the next support at 97.14 (monthly low Oct.18) seconded by 97.03 (monthly low Aug.9) and then 96.67 (low Jul.18). On the upside, a breakout of 97.89 (high Oct.28) would open the door to 98.35 (55-day SMA) and finally 99.25 (high Oct.9).

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