US Dollar Index debilitates to daily lows near 98.50

• DXY loses further ground and tests the mid-98.00s.
• Yields of the US 10-year note fade the uptick to 1.72%.
• US CB’s Consumer Confidence next of relevance.

The US Dollar Index (DXY), which tracks the Greenback vs. a basket of its main competitors, has now given away initial gains and retired to the negative territory around 98.50.

US Dollar Index offered ahead of key data

After two consecutive daily advances, the upside momentum in the index appears to be running out of steam and keeps correcting lower after Monday’s tops in the 98.80/85 band.

In the meantime, recent positive headlines from the US-China trade front appears to have lent extra support to the risk-associated space in detriment of the buck, which came under pressure tracking lower US yields.

In the US data space, US house prices tracked by the S&P/Case-Shiller Index rose below expectations in July at a non0-seasonally-adjusted 2.0% YoY. Later in the session, the US Consumer Confidence for the month of September will be in centre stage.

What to look for around USD

The index has been managing well to keep the trading range above the 98.00 barrier in past sessions. Market participants have already digested the recent FOMC event and appear to have shifted their focus to the US-China trade war once again. Domestic data in combination with politics and trade developments should be key in determining the next decision on rates after Fed’s Powell left the door open for extra easing along the road. However, the increasing dissent among FOMC members casts further clouds on the probability of extra stimulus at the upcoming meetings, leaving the outlook on interest rates quite mixed, to say the least. Looking at the broader picture, the positive view on the Dollar is still well underpinned by the solid US labour market, strong consumer confidence and spending and the auspicious pick up in consumer prices, all adding to the safe haven appeal and the status of ‘global reserve currency’. 

US Dollar Index relevant levels

At the moment, the pair is losing 0.09% at 98.53 and faces immediate contention at 97.86 (monthly low Sep.13) followed by 97.62 (100-day SMA) and finally 97.17 (low Aug.23). On the other hand, a breakout of 99.10 (high Sep.12) would aim for 99.37 (2019 high Sep.3) and then 99.89 (monthly high May 11 2017).