US Dollar Index recedes from tops, still targets 98.00 and above

  • The upside in DXY failed just ahead of the 98.00 barrier.
  • Yields of the US 10-year note dropped to the vicinity of 2.36%.
  • U-Mich gauge coming up next in the US docket.

The greenback is trimming earlier gains and returns to the 97.80 region when measured by the US Dollar Index (DXY).

US Dollar Index focused on data, Fedspeak

The index remains on the way to close the first week with gains after two consecutive weekly pullbacks, managing well to reverse the leg lower and rebound from lows in the boundaries of 97.00 the figure (Monday).

The combination of trade jitters and strong data releases on the US calendar has been sustaining the moderate recovery in the buck this week, while mixed tone from Fed speakers showed no clear bias.

Closing the weekly docket, the preliminary reading of US Consumer Sentiment tracked by the U-Mich index for the current month is coming up next along with speeches by NY Fed J.Williams (permanent voter, centrist) and FOMC’s R.Clarida (permanent voter, dovish).

What to look for around USD

The greenback keeps looking to the US-China trade dispute as the main source of volatility for the time being, although a high degree of uncertainty as well as caution among investors seem to prevail so far. On another direction, inflation figures remain in the centre of the debate among Fed members amidst a 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 gaining 0.04% at 97.86 and faces the next up barrier at 97.95 (high May 17) seconded by 98.10 (high May 3) and finally 98.32 (2019 high Apr.25). On the other hand, a break below 97.64 (21-day SMA) would open the door for 97.17 (55-day SMA) and then 97.03 (low May 13).

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