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US Dollar Index looks consolidative near 97.40 ahead of CPI

  • DXY remains sidelined around the 97.40 region.
  • Markets’ focus stays on US-China trade.
  • December’s CPI, NFIB index, Fedspeak all due later.

The greenback is extending its consolidative theme in the 97.40 area when gauged by the US Dollar Index (DXY) in the first half of the week.

US Dollar Index now looks to trade and data

The index is looking to add to Monday’s small gains, always in the mid-97.00s and amidst increasing optimism regarding the sign of the US-China’s ‘Phase One’ deal (expected at some point on Wednesday) and dissipating concerns in the Middle East.

In the meantime, the better mood in the riskier assets has been also supporting the upside in yields of the key US 10-year note to levels beyond 1.85%, underpinning at the same time the positive note around the buck.

Later in the day, the main event will be the release of US inflation figures tracked by the CPI for the month of December, seconded in relevance by the NFIB index. In addition, NY Fed J.Williams (permanent voter, centrist) will discuss Behavioural Science in London and Kansas City Fed E.George (2022 voter, hawkish) speaks at an event in KC.

What to look for around USD

The index has started the week on a mild positive tone following last week’s new 2020 highs and despite the latest Payrolls figures disappointed expectations. In the meantime, all the attention has now shifted to the imminent sign of the ‘Phase One’ deal with China while tensions on the US-Iran front continues to evaporate. 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 gaining 0.02% at 97.39 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 97.19 (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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