When tracked by the US Dollar Index (DXY), the greenback is now attempting some consolidation in the mid-97.00s against the backdrop of a tepid bounce in US yields.
8 August 2019, GKFX – The index is navigating within the negative territory in the second half of the week amidst the prevailing ‘flight to safety’ stance in the global markets and persistent concerns over the US-China trade war.
The correction lower in the buck came amidst a drop in yields of the US-10 year benchmark to the boundaries of 1.60%, levels last seen in the Autumn 2016. The broad-based sharp move lower in yields has also seen German 10-year Bunds and UK 10-year Gilts recording fresh all-time lows.
In the meantime, there is no news from the US-China trade front, where according to the latest news, both parties could resume talks in the US at some point in the next month.
Later in the US docket, the only release of note will be the weekly Claims seconded by June’s Wholesale Inventories.
What to look for around USD
The fresh bout of US tariffs on Chinese products has undermined the Fed-led rally in the buck to levels last seen in May 2017 near 99.00 the figure, sparking a sharp leg lower to the area just above the critical 200-day SMA.
By the same token, yields of the US 10-year benchmark have dropped to multi-year lows in the sub-1.60% area fuelled by the generalized ‘flight to safety” mood, always on the back of increasing jitters on the US-China trade war. Regarding the greenback, its demand appears propped up by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals and the less dovish stance from the Federal Reserve.
US dollar index technical analysis
At the moment, the pair is losing 0.08% at 97.54 and a breakdown of 97.21 (low Aug.6) would open the door to 96.92 (200-day SMA) and then 96.67 (low Jul.18). On the other hand, the next up barrier aligns at 97.92 (10-day SMA) followed by 98.37 (monthly high May 23) and then 98.93 (2019 high Aug.1).
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