US Dollar Index recovery fails ahead of 97.00

  • The index remains under pressure below 97.00.
  • US trade deficit shrunk to $49.4 billion during February.
  • Fed’s Beige Book, Fedspeak next on tap.

The US Dollar Index (DXY), which tracks the greenback vs. a basket of its main competitors, remains on the defensive today below the key barrier at 97.00 the figure.

US Dollar Index stays capped by 97.00

The index stays trapped within a tight range around the 97.00 neighbourhood so far this week, with pullbacks so far contained in the 96.80 region ahead of the 55-day SMA.

Positive risk sentiment has been undermining occasional bullish attempts in the greenback, leaving the upside momentum somewhat limited just above 97.00 the figure for the time being.

Some support for DXY, however, appears to have emerged after the US trade deficit narrowed more than expected to $49.4 billion during February. Later in the session, the EIA will report on the weekly performance of US crude oil supplies and the Fed will publish its Beige Book.

Also expected to grab attention, Philly Fed P.Harker (2020 voter, hawkish) will speak on the Economic Outlook and St.Louis Fed J.Bullard (voter, dovish) speaks at Hyman Minsky event.

What to look for around USD

DXY keeps tracking the broad risk appetite trends while headlines coming from the US-China/US-EU trade fronts also collaborate with the price action. The recent mixed views from the FOMC minutes reinforce the neutral stance of the Fed in the next months, although a rate raise has not been ruled out just yet. On the greenback’s positive side we find solid US fundamentals, its safe haven appeal, favourable yield spreads vs. its peers and the status of global reserve currency. This, plus the Fed’s neutral/bullish prospects of monetary policy vs. the dovish shift seen in its G10 peers are expected to keep occasional dips in the buck shallow for the time being.

US Dollar Index relevant levels

At the moment, the pair is retreating 0.10% at 96.95 and a breach of 96.75 (low Apr.12) would open the door to 96.72 (55-day SMA) and finally 96.07 (200-day SMA). On the upside, the next hurdle emerges at 97.22 (high Apr.10) seconded by 97.52 (high Apr.2) and then 97.71 (2019 high Mar.7).

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