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US Dollar Index looks bid near 97.50

  • DXY leaves behind Friday’s pullback and approaches 97.50.
  • Yields of the 10-year note hover around 1.85%.
  • ‘Phase One’ deal comes to the fore this week.

The US Dollar Index (DXY), which measures the greenback vs. a bundle of its main rivals, has resumed the upside on Monday following Friday’s correction and it is now trading at shouting distance from the 97.50 level.

US Dollar Index now looks to trade

The favourable risk environment has been helping the buck in recent sessions pari passu with diminishing concerns on the US-Iran front and renewed hopes of a deal between the US and China. In this regard, it is worth mentioning than both countries are expected to sign the ‘Phase One’ deal at some point in the next couple of days.

Also collaborating with today’s upside, yields of the key US 10-year note have rebounded from lows and are testing the upper end of the range in the proximity of 1.85%.

Later in the day, the Monthly Budget Statement will be the sole release in the US docket. In addition, Boston Fed E.Rosengren (2022 voter, hawkish) will discuss Economic outlook and Atlanta Fed R.Bostic (2021 voter, centrist) will also discuss Economic Outlook and Monetary Policy).

What to look for around USD

The index has started the week on a cautious note following last week’s new 2020 highs and after the latest Payrolls figures disappointed expectations. Furthemore, all the attention has now shifted to the imminent sign of the ‘Phase One’ deal with China while tensions in the Middle East remain subsided for the time being. So far, the recovery in the greenback continues to target the key 200-day SMA in the 97.70 region. Above this level, DXY should regain the constructive view, always underpinned by the so far ‘wait-and-see’ stance from the Fed vs. the broad-based dovish view from its G10 peers, the dollar’s safe haven appeal and its status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the index is up 0.09% at 97.44 and a breakout of 97.58 (2020 high Jan.9) would open the door to 97.69 (200-day SMA) and finally 97.87 (61.8% Fibo of the 2017-2018 drop). On the other hand, initial contention is expected at 97.18 (21-day SMA) seconded by 96.36 (monthly low Dec.31) and finally 96.04 (50% Fibo of the 2017-2018 drop).

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