- DXY rebounds from 97.50 and looks cautious ahead of GDP.
- Yields of the US 10-year note recede from 2.10%.
- US advanced Q2 GDP figures next of relevance in the docket.
The greenback, measured by the US Dollar Index (DXY), is alternating gains with losses around 97.80 at the end of the week.
US Dollar Index trades flat ahead of GDP
After quite a volatile session on Thursday, the index managed to recover from the ECB-led drop to the mid-97.00s and regain the upper end of the range below the 98.00 handle.
The greenback has been gaining momentum in past sessions following markets’ perception that the Fed’s dovish tone remains far from a done deal at next week’s meeting. It is worth mentioning that investors have practically priced in a 25 bps rate cut – so called ‘insurance cut’ - in detriment of a larger cut for the time being.
Later in the day, an estimate of the US GDP during the April-June period will grab all the attention.
What to look for around USD
Investors have already priced in a 25 bps interest rate cut hits month, while a larger rate cut appears to have lost consensus in the last sessions. Trade tensions now look somewhat alleviated after US and China decided to restart talks next week. The demand for the greenback, in the meantime, stays underpinned by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals when compared to its G10 peers and the shift to a more accommodative stance from the rest of the central banks.
US Dollar Index relevant levels
At the moment, the pair is flat at 97.79 and faces the next resistance at 97.92 (monthly high Jul.25) seconded by 98.33 (monthly high Apr.23) and finally 98.37 (2019 high May 23). On the flip side, a breakdown of 96.67 (low Jul.18) would aim for 96.46 (low Jun.7) and then 96.04 (50% Fibo of the 2017-2018 drop).
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