US Dollar retreats to mid-94s, remains on track to end week in positive territory

  • US Dollar Index, once again, fails to break above 95.
  • Trade conflict fears weigh on consumer confidence in the U.S.
  • US 10-year T-bond yield eases to 2.835%.

The US Dollar Index, which tracks the greenback against a basket of six major currencies, extended its upside to a fresh 2-week high at 95 during the European trading hours but failed to preserve its momentum as the falling T-bond yields and disappointing data from the United States weighed on the greenback. As of writing, the index was virtually unchanged on the day at 94.55.

On Friday, the Consumer Sentiment Index published by the University of Michigan eased to 97.1 in July's first preliminary reading from 98.2 in June and failed to match the market expectation of 98.2. The report showed that consumers' concerns regarding the potential impact of the trade conflict were escalating. "Negative concerns about the impact of tariffs have recently accelerated, rising from 15% in May, to 21% in June, and 38% in July," the publication read.

Furthermore, the import price index decreased by 0.4% on a monthly basis in May while the annual export price index came in at 5.3% to fall short of the experts' estimate of 5.7%.

On the other hand, falling Treasury bond yields make it even more difficult for the buck to find demand. At the moment, the 10-year reference is down 0.65% on the day at 2.835%.

Although the DXY lost its traction on Friday, it remains on track to record gains for the week as the Fed's hawkish stance limit the losses. Earlier today, the Fed published the statement that Chairman Powell will be presenting to the Congress and reiterated that the current state of the economy would warrant further gradual rate increases.

Technical levels to consider

The initial resistance aligns at 95 (psychological level/daily high) ahead of 95.25 (Jun. 28 high) and 95.75 (Jul. 12, 2017, high). On the downside, supports are located at 94.50 (daily low), 93.80 (Jul. 11 low) and 93.40 (Jul. 9 low).

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