US Dollar Index regains traction and tests highs near 98.30

DXY rebounds from lows and visits the 98.30 region.
Yields of the US 10-year note probe the 1.58% area.
FOMC minutes next of relevance ahead of Jackson Hole.

Pablo Piovano FXStreet

After a brief test to sub-98.00 levels during early trade, the US Dollar Index (DXY) has now reclaimed some shine and moves to the area of daily highs near 98.30.

US Dollar Index focused on FOMC, Powell

The index is resuming the upside after Tuesday’s negative price action despite recording fresh three-week highs around 98.50.

The resurgence of trade concerns combined with the marked drop in yields of the key US 10-year benchmark have weighing on investors’ sentiment yesterday and forced the buck to give away part of the recent advance.

On another front, San Francisco Fed M.Daly (2021 voter, dovish) talked down the likeliness of a recession in the US economy, saying that the uncertainty on the US-China trade front and concerns over global growth has been collaborating with tis view.

In the US data space, Existing Home Sales is due later today ahead of the EIA report on US crude oil inventories and the more relevant FOMC minutes, all ahead of the speech by Chief J.Powell and the Jackson Hole Symposium on Friday.

What to look for around USD

The main focus this week will be on the Jackson Hole Symposium as well as on any hint on the Fed’s plan for the next months. In the meantime, trade concerns, while still unabated and in combination with the inversion of the yield curve, carry the potential to spark further ‘insurance cuts’ by the Federal Reserve and thus undermine the constructive prospects of the buck in the next months. Opposed to this view emerges the Greenback’s safe have appeal, the status of ‘global reserve currency’, so far solid US fundamentals vs. overseas economies and the less dovish stance from the Federal Reserve (as per the latest FOMC event).

US Dollar Index relevant levels

At the moment, the pair is gaining 0.09% at 98.24 and faces the next up barrier at 98.45 (high Aug.20) followed by 98.93 (2019 high Aug.1) and the 99.89 (monthly high May 2017). On the other hand, a break below 97.91 (21-day SMA) would aim for 97.21 (low Aug.6) and then 96.98 (200-day SMA).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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