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US Dollar Index flirting with highs around 98.00

  • US Dollar Index keeps the 98.00 handle so far.
  • Yields of the US 10-year note rebound to 2.40%.
  • No US data releases today, focus on Fedspeak.
The greenback, when tracked by the US Dollar Index (DXY), has started the week on a positive note and manages to keep business above the recently reclaimed 98.00 the figure.

US Dollar Index focused on Fedspeak

The index is extending the rally for the sixth session in a row on Monday, always against the backdrop of persistent concerns on the US-China trade front, a mild bounce in US money markets and recent auspicious results from the US docket.

In fact, negotiations between China and the US have stalled following last week’s collapse in talks in response to the fresh wave of US tariffs and the subsequent Chinese retaliatory measures. The Chinese currency, in the meantime, depreciated to the lowest level so far this year to the 6.92 area vs. its American peer.

The Chicago Fed National Activity Index will be the sole publication in the US calendar today, although the buck is expected to remain vigilant on upcoming speeches: Philly Fed P.Harker speaks about Management Science in Boston, R.Clarida (permanent voter, dovish) and NY Fed J.Williams (permanent voter, centrist) will participate in the ‘Fed Listens’ Event in New York and Chief J.Powell will speak at the Atlanta Fed Financial Markets Conference.

What to look for around USD

With the US-China trade talks mired in the mud for the time being, investors’ attention have now shifted to the Chinese government and the likeliness of intervention in the Yuan, as the currency slowly approaches the psychological 7.00 mark without any progress in the negotiations, at least in the short-term horizon. On another direction, inflation figures remain in the centre of the debate among Fed members despite the solid labour market and healthy fundamentals, preventing the Fed from fully ruling out a rate hike later in the year. The positive outlook on the buck, however, stays unchanged and sustained by overseas weakness, its safe haven appeal, favourable yield spreads vs. the Fed’s G10 peers and the status of global reserve currency.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.02% at 98.03 and faces the next up barrier at 98.10 (high May 3) seconded by 98.32 (2019 high Apr.25) and finally 98.97 (78.6% Fibo of the 2017-2018 drop). On the other hand, a break below 97.67 (21-day SMA) would open the door for 97.21 (55-day SMA) and then 97.03 (low May 13).