US Dollar Index struggles near 98.40, focus on FOMC, Jackson Hole

The Greenback seems to have met a tough barrier around 98.40 when tracked by the US Dollar Index (DXY) so far this week.

US Dollar Index focused on risk trends, yields

The upside momentum around the index is losing some traction after six consecutive sessions with gains, showing some indecision in the 98.40 region, or three-week highs.

The better tone in the risk-appetite trends fuelled the selling bias in the safe havens and sustained the rebound in yields, pushing the index higher at the same time amidst rising expectations ahead of the publication of the FOMC minutes and the Jackson Hole Symposium.

Further out, the US 2y-10y yield curve steepened nearly 10 bps since Friday, collaborating with the upbeat mood among investors and sustaining further the improvement in sentiment.

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 losing 0.04% at 98.32 and a break below 97.89 (21-day SMA) would aim for 97.21 (low Aug.6) and then 96.97 (200-day SMA). On the flip side, the next hurdle emerges at 98.39 (high Aug.19) followed by 98.93 (2019 high Aug.1) and the 99.89 (monthly high May 2017).