US Dollar Index remains depressed near 97.20, looks to NFP

  • DXY navigates near 2-week lows around 97.20.
  • US 10-year yields drop to the 1.70% area.
  • US NFP, ISM Manufacturing, Fedspeak next of relevance.

The Greenback, in terms of the US Dollar Index (DXY), remains well on the defensive this week and is now trading at shouting distance from 2-week lows in the 97.20 region.

US Dollar Index focused on data

The index is losing ground since Monday and it has almost fully faded the recent recovery to the vicinity of 98.00 the figure, recorded soon after the Fed delivered another insurance cut (Wednesday).

The improved tone in the risk-associated complex keeps weighing on the buck despite the recent ‘hawkish cut’ by the Federal Reserve and some renewed concerns on the US-China trade front after Chinese officials casted doubts over a trade deal in the longer run.

Later today, Non-farm Payrolls will be in centre stage seconded by the ISM Manufacturing and speeches by Dallas Fed R.Kaplan (2020 voter, dovish), FOMC’s R.Clarida (permanent voter, dovish), FOMC’s R.Quarles (permanent voter, centrist) and NY Fed J.Williams (permanent voter, centrist).

What to look for around USD

DXY came under extra downside pressure despite the Fed matched initial expectations by lowering rates at Wednesday’s meeting and signalling a pause in the easing cycle in the near term at least. The Fed is now expected to remain vigilant mainly on the global scenario, where trade concerns and the impact on global growth remain in centre stage amidst the loss of momentum in the domestic economy. On the broader view, the constructive outlook in DXY looks a bit damaged but it still is in play as the Fed moves into an impasse vs. the dovish stance from its G10 peers, 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 0.10% at 97.24 and faces immediate contention 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 break above 98.00 (high Oct.30) would open the door to 98.30 (55-day SMA) and finally 99.25 (high Oct.9).

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