US Dollar Index weaker, puts 97.00 to the test
- The index drops to fresh lows near the 97.00 handle.
- Yields of the US 10-year note plummet to 2.41%.
- China announced fresh retaliatory measures.
The greenback has accelerated the downside on Monday and is now flirting with the critical support at 97.00 the figure when tracked by the US Dollar Index (DXY).
US Dollar Index loses the grip on Chinese news
The index comes under extra downside pressure and tested the boundaries of the 97.0 milestone tracking the decline in US 10-year yields to fresh lows in the 2.41% region.
The down move came after China announced it will impose tariffs on US products worth around $60 billion. The announcement follows the recent increase of tariffs of US imports of Chinese products (kicked in last Friday) and threats of further tariffs to be implemented as soon as early August. Fanning the flames, market chatter noted the possibility that China could dump its US Treasuries.
In the US docket, speeches by Boston Fed E.Rosengren (voter, centrist), FOMC’s R.Clarida (permanent voter, dovish) and Atlanta Fed R.Kaplan (2020 voter, dovish) should keep the interest around the buck later today.
What to look for around USD
The centre of the debate for the greenback has shifted to the US-China trade dispute, although a high degree of uncertainty as well as caution among investors seem to prevail for the time being. On another direction, the lack of traction in US inflation – and concerns among Fed members – is currently weighing on the buck and threatens its constructive view. Dips in the greenback, however, are seen shallow as overseas weakness, the safe haven appeal, favourable yield spreads vs. the Fed’s G10 peers and the status of global reserve currency keep the positive outlook on the index unchanged.
US Dollar Index relevant levels
At the moment, the pair is retreating 0.28% at 97.05 and a breach 96.75 (low Apr.12) would expose 96.71 (100-day SMA) and finally 96.29 (200-day SMA). On the other hand, the next up barrier emerges at 97.51 (21-day SMA) seconded by 98.10 (high May 3) and finally 98.32 (2019 high Apr.25).