US Dollar Index weaker, challenges 4-month lows near 95.80

  • DXY loses further ground and approaches 95.80.
  • Yields of the US 10-year note broke below 2.0%.
  • Consumer Confidence, Powell in the limelight today.

The greenback, when tracked by the US Dollar Index (DXY), remains on the defensive yet another session, this time dropping to fresh 4-month lows near 95.80.

US Dollar Index focused on risk trends, Powell, data

The index is losing ground for the fifth consecutive session on Tuesday, shedding around 2% since last week’s tops near 97.80, always against the backdrop of speculations on rate cuts by the Fed and the resurgence of risk aversion.

The pick up in the risk-off mood accelerated after President Trump announced a new set of sanctions against Iran at the beginning of the week, all amidst further escalation in tensions between both countries. Yields of the US-10 year note dropped below the psychological 2.0% mark and keep navigating that area while USD/JPY breached the 107.00 support, recording fresh 5-month lows.

In the data space, house prices tracked by the S&P/Case-Shiller Index is due later in the NA session seconded by New Home Sales and the Consumer Confidence gauge by the Conference Board.

Moving forward, Chief J.Powell will discuss Economic Outlook and Monetary Policy, while NY Fed J.Williams (permanent voter, centrist) will make remarks at a Finance Forum, Atlanta Fed R.Bostic (2021 voter, centrist) will speak on Housing, Richmond Fed T.Barkin (2021 voter, centrist) speaks in Canada and St.Louis Fed J.Bullard (voter, dovish) speaks in St.Louis.

What to look for around USD

Potential rate cuts by the Fed remain behind the sharp decline in the greenback, forcing the US Dollar Index to break below important contention areas and enter into bearish territory. In this regard, Chief Powell’s views on the economy and monetary policy will be key today amidst speculations of an ‘insurance’ cut in July and prospects of a technical recession at some point in H2 2020.

US Dollar Index relevant levels

At the moment, the pair is receding 0.11% at 95.90 and a break below 95.82 (low Feb.28) would open the door to 95.74 (low Mar.20) and then 95.16 (low Jan.31). On the upside, the next resistance comes in at 96.57 (200-day SMA) seconded by 97.36 (55-day SMA) and finally 97.77 (high Jun.18).

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