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US Dollar Index bounces off lows, back near 99.00 ahead of FOMC

Written by By Pablo Piovano | 2019-10-09 13:42:01 GMT
  • DXY rebounds from the 98.90 region, or daily lows.
  • Yields of the US 10-year note tested peaks around 1.56%.
  • US FOMC minutes next of significance on the calendar.

After bottoming out in the 98.90 region earlier in the day, the Greenback has now regained the 99.00 neighbourhood when gauged by the US Dollar Index (DXY).

US Dollar Index now looks to FOMC minutes

The index failed to add to recent gains further north of the 99.00 handle earlier in the session, sparking a knee-jerk to daily lows in the 98.90 area, where some decent support appears to have emerged.

The rebound in the buck came in tandem with a better tone in yields of the key US 10-year reference, managing to rebound from the sub-1.52% area to levels beyond the 1.56% handle.

In the meantime, investors (and the Greenback) remain vigilant on the developments from the US-China trade talks due to kick in tomorrow in Washington, always amidst a pretty divided consensus over the potential outcome.

Later in the NA session, the buck is expected to remain under scrutiny, as the FOMC minutes is expected to shed further details of the Committee’s decision to cut rates at the September meeting.

Additional data will see JOLTs Job Openings, Wholesale Inventories and the weekly report on US crude oil supplies by the DoE.

What to look for around USD

The Greenback has started the week on a better mood and it has managed to regain the 99.00 neighbourhood. Renewed US recession jitters and Fed easing chatter weighed on the buck during last week, particularly after the awful prints from the ISM gauges and the mixed employment report for the month of September. In the very near term, investors’ focus will be on today’s FOMC minutes and US-China high-level trade talks (Thursday and Friday). Despite evidence that the US economy could be losing some momentum, the labour market remains strong as well as consumer spending, while the recent pick up in inflation adds to the auspicious domestic scenario vs. the generalized slowdown in most of overseas economies. On the broader view, the constructive outlook in DXY looks a bit damaged but it still is in play amidst a divided FOMC vs. a broad-based dovish stance from the rest of the G-10 central banks. In addition, the positive view on USD remains well sustained by its safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is losing 0.07% at 99.05 and faces the next support at 98.76 (21-day SMA) seconded by 98.34 (55-day SMA) and finally 97.86 (monthly low Sep.13). On the upside, a breakout of 99.67 (2019 high Oct.1) would aim for 99.89 (monthly high May 11 2017) and then 100.00 (psychological handle).

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By Pablo Piovano

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