US Dollar Index regains traction and tests 98.40

The greenback, in terms of the US Dollar Index (DXY), has started the week on a positive note and is hovering around the 98.40/50 region ahead of the European opening.

US Dollar Index rebounds on Powell, eyes on CPI

Following Friday’s pullback to the vicinity of the 98.00 handle, the index managed to regain its shine at the beginning of the week as market participants continue to assess the speech by Chief Powell in Zurich last Friday.

In fact, Powell has once again reiterated the Fed’s commitment to support the ongoing expansion, adding that he does not see a US recession on the horizon and stressed the good shape of the labour market, all amidst markets’ speculations of another ‘insurance cut’ next week.

Later in the week, inflation figures for the month of August will be the salient event (Thursday). Today, the only release of note will be the Consumer Credit figures.

What to look for around USD

DXY looks recovered from the recent poor performance after Chief Powell reiterated his pledge to support the current expansion, while market participants are still factoring in potential interest rate cuts in the next meetings and a probable recession at some point in 2020. However, the constructive view in DXY still looks firm on the back of the solid labour market, strong consumer confidence and positive GDP readings, while inflation is seeing regaining upside traction in the near term. Also bolstering the buck emerges its safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.43% at 98.43 and faces the next hurdle at 99.37 (2019 high Sep.3) seconded by 99.89 (monthly high May 11 2017) and then 100.00 (psychological level). On the other hand, a breach of 98.01 (monthly low Sep.6) would aim for 97.62 (55-day SMA) and finally to 97.17 (low Aug.23).