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US Dollar Index eases from tops, around 97.60

  • DXY met solid resistance near 97.70.
  • The key 200-day SMA remains the key hurdle for bulls.
  • Empty docket should leave the attention to risk trends.

The greenback, when measured by the US Dollar Index (DXY), trades on a soft note in the first half of the week, easing further ground from recent tops above 97.70.

US Dollar Index capped by the 200-day SMA

The re-emergence of the risk-off sentiment has given extra oxygen to the safe haven assets on Tuesday, sponsoring the decline of US yields and putting the buck under extra downside pressure.

In fact, news that the Wuhan coronavirus is spreading in China and that it can be passed from human-to-human has been weighing on investors’ sentiment and sustaining the renewed inflows into the safer assets.

In the meantime, US markets will return to normalcy on Tuesday following MLK’s holiday on Monday. The docket, however, will only publish minor data releases.

What to look for around USD

DXY has started the week on a defensive fashion following 2020 highs in the 97.70 area, coincident with the critical 200-day SMA. The resurgence of some risk-aversion in the global markets have been weighing on the greenback in past hours, leaving the 97.70 region as a potential near-term top for the time being. On another scenario, investors are now looking to domestic data releases for direction in the short-term horizon amidst ‘radio silence’ from the US-China trade front. The index should regain the constructive view above the 200-day SMA, 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 losing 0.03% at 97.58 and faces immediate contention 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). On the upside, a breakout of 97.73 (2020 high Jan.20) would open the door to 97.87 (61.8% Fibo of the 2017-2018 drop) and then 97.89 (100-day SMA).

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