US Dollar Index flirting with daily highs around 96.80
- The index has started the week on a positive footing near 96.80.
- Yields of the US 10-year note leap beyond 2.12%.
- Trade, Fed rate cuts, keep dominating the sentiment.
The greenback, measured by the US Dollar Index (DXY), is trading on a better mood at the beginning of the week, managing to reclaim the upper-96.00s.
US Dollar Index bounces off the 200-day SMA near 96.50
The index regains some buying interest after testing the critical support at the 96.50/45 band on Friday, where converge the critical 200-day SMA and the multi-month support line.
Miserable results from Friday’s US Non-farm Payrolls during last month added to the already escalating market chatter regarding the likeliness that the Fed could cut rates in the next month in response to the ongoing trade jitters and potential slowdown in the US economy.
This view has been also reinforced by dovish Fedspeak as of late has, adding to the potential move lower in the Fed Funds in the next months
Later in the NA session, JOLTS Job Openings for the month of April will be the only release in the US docket, while Producer Prices and the NFIB index are coming up on Tuesday and the more relevant CPI on Wednesday.
What to look for around USD
Markets’ idea of a probable rate cut by the Federal Reserve in the near to medium term were boosted by the huge miss from the US labour market during May, exacerbating the selling bias in the buck. However, and in spite of the recent results, the labour market remains strong, wage growth keep pushing higher and the overall economy looks healthy - specially when we consider the weakness in overseas economies – all begging the question whether current speculations of rate cuts are not overdone. In addition, US-China trade jitters remain everything but abated so far with the focus of attention now moving to the upcoming G20 meeting in Japan, where the issue will take centre stage.
US Dollar Index relevant levels
At the moment, the pair is gaining 0.26% at 96.81 and faces the next hurdle at 96.97 (100-day SMA) seconded by 97.41 (55-day SMA) and finally 97.87 (61.8% Fibo of the 2017-2018 drop). On the downside, a breakdown of 96.46 (low Jun.7) would open the door for 96.04 (50% Fibo of the 2017-2018 drop) and then 95.82 (low Feb.28).