- DXY holding on to the mid-97.00s on Monday.
- US-China trade war remains in centre stage.
- US CPI, Retail Sales, U-Mich index next of relevance this week.
The greenback, in terms of the US Dollar Index (DXY), is prolonging the multi-session sideline theme in the 97.50 region at the beginning of the week.
US Dollar Index keeps looking to trade
The index navigates within a tight range on Monday, always around the 97.50 region and closely following the developments from the US-China protracted trade war.
Absent fresh headlines on the trade front, investors continue to scrutinize recent threats by President Trump to raise tariffs from the current 10% to 25%, while the focus of attention is also on probable retaliatory measures by Beijing. It is worth recalling that both parties should meet at some point in September to resume talks, this time in the US.
Moving forward, there are no data releases scheduled for today in the US calendar, while inflation figures tracked by the CPI, Retail Sales and the advanced Consumer Sentiment gauge are all due later in the week.
What to look for around USD
The fresh round of US tariffs on Chinese products has undermined the Fed-led rally in the buck and triggered a correction lower from new 2019 highs just below the 99.00 handle. By the same token, yields of the US 10-year benchmark have dropped to multi-year lows in the vicinity of 1.60% area fuelled by the generalized ‘fly-to-safety” mood, always on the back of escalating tensions on the US-China trade war. These rising trade concerns, while unabated and in combination with the current 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 losing 0.10% at 97.49 and a breakdown of 97.21 (low Aug.6) would open the door to 96.93 (200-day SMA) and then 96.67 (low Jul.18). On the other hand, the next up barrier emerges at 97.85 (high Aug.7) seconded by 98.37 (monthly high May 23) and then 98.93 (2019 high Aug.1).
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