US Dollar Index remains under pressure near 96.00

• DXY meets strong support in the 96.00 neighbourhood.
• US 10-year yields slip back to the 2.05% handle.
• Chicago Fed Activity index next of relevance in the docket.

The greenback, in terms of the US Dollar Index (DXY), appears to have met quite decent support in the 96.00 region.

US Dollar Index looks to G-20, data

The index remains under heavy downside pressure at the beginning of the week, as markets participants continue to adjust to the recent dovish message from the FOMC and the idea of rate cuts as early as next month.

On another direction, US-China trade concerns appear to have entered an impasse ahead of the G-20 meeting over the weekend in Japan, with the Trump-Xi meeting taking centre stage.

Later in the US docket, the Chicago Fed National Activity Index will be the main release seconded by the Dallas Fed Manufacturing gauge.

The index charted a weekly bearish ‘outside candle’ last week, maybe anticipating some extra weakness in the short-term horizon. However, the extent of the selling bias in the buck remains to be seen. While the Fed joined the rest of its peers in the dovish train, the US economy is still outperforming its overseas rivals, which should end up lending some oxygen to the greenback.

What to look for around USD

The Federal Reserve is not ‘patient’ anymore. The prospects of rate cuts have already emerged on the horizon, while an ‘insurance cut’ could come as early as July. Compared with other central banks, the Fed has more room to manoeuvre in case it goes ‘full accommodative’ in the next months (due to the hiking cycle that started in 2015). If we add that the US economy is healthier than its overseas peers, the greenback’s status of ‘global reserve currency’ and its safe haven appeal, further weakness in the buck is far from a done deal.

US Dollar Index relevant levels

At the moment, the pair is advancing 0.07% at 96.17 and faces the next hurdle at 96.57 (200-day SMA) seconded by 97.39 (55-day SMA) and finally 97.77 (high Jun.18). On the downside, a break below 96.09 (low Jun.21) would open the door for 96.04 (50% Fibo of the 2017-2018 drop) and then 95.82 (low Feb.28).