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US Dollar Index sidelined around 97.30 ahead of data

  • DXY extends the weekly consolidation around 97.30.
  • Upside remains capped by the 55-day SMA near 97.60.
  • Housing Starts, Building Permits, U-Mich index next on tap.

The greenback is looking to extend the bounce from Thursday’s lows in the vicinity of the 97.00 handle when tracked by the US Dollar Index (DXY).

US Dollar Index looks to data

The index is up for the second session in a row, managing to reverse Thursday’s weakness after US data releases came in on the strong side.

In fact, the Philly Fed index, weekly Claims and Core Retail Sales all came in above expectations, fuelling the recovery of the buck, US yields and stocks.

The dollar showed some signs of weakness after US and China signed the ‘Phase 1’ deal, briefly dropping to the boundaries of the key support at 97.00 the figure. As said, subsequent positive data helped the index to regain some poise and rebound to the current 97.30 region.

Later in the docket, the US housing sector will be in the limelight with the publication of Housing Starts along with Building Permits. In addition, Industrial Production is also due followed by Manufacturing Production, Capacity Utilization, JOLTS Job Openings and the advanced gauge of the Consumer Sentiment for the current month. Further out, Philly Fed P.Harker (voter, dovish) will discuss the Economic Outlook.

What to look for around USD

The upside momentum in DXY has so far met interesting resistance in the area of yearly highs around 97.60, while the weekly decline met contention in the 97.00 neighborhood. In the meantime, investors are now looking to domestic data releases for direction in the near-term and any bullish attempt in the buck should initially target the key 200-day SMA in the 97.70 region. Above this level, DXY should regain the constructive view, always underpinned by the current ‘wait-and-see’ stance from the Fed (confirmed once again at the latest FOMC minutes) 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 0.01% at 97.32 and a breakout of 97.58 (2020 high Jan.9) would open the door to 97.70 (200-day SMA) and finally 97.87 (61.8% Fibo of the 2017-2018 drop). On the other hand, initial contention emerges at 97.09 (weekly low Jan.16) followed by 96.36 (monthly low Dec.31) and finally 96.04 (50% Fibo of the 2017-2018 drop).

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