US Dollar Index tumbles to 2-day lows near 97.50 on ECB
- DXY recedes from tops near the 98.00 mark.
- Yields of the US 10-year note rebound to 2.05%.
- ECB kept rates on hold, opens door to QE, tiered depo system.
The greenback, when tracked by the US Dollar Index (DXY), has now abandoned the area of fresh tops just below the 98.00 handle and is navigating lows in the mid-97.00s.
US Dollar Index weaker post-ECB
After testing the doorsteps of the 98.00 handle, or fresh 2-month tops, the greenback has quickly lost momentum and plummeted to the 97.50 region following the ECB event.
In fact, despite the ECB delivered a dovish message at today’s meeting, market participants have apparently priced in such an outcome (a case of “selling the rumour, buying the fact” this time) encouraging buyers to return to the market and push EUR/USD to 2-day tops.
Back to the US, weekly Claims rose by 206K, taking the 4-Week Average to 203.00K from 218.75K. Further data saw the trade deficit easing a tad to $74.17 billion during June and Durable Goods Orders expanding at a monthly 2.0% in June, beating expectations.
What to look for around USD
Investors have already priced in a 25 bps interest rate cut hits month, while a larger rate cut appears to have lost consensus in the last sessions. Trade tensions now look somewhat alleviated after US and China decided to restart talks next week. The demand for the greenback, in the meantime, stays underpinned by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals when compared to its G10 peers and the shift to a more accommodative stance from the rest of the central banks.
US Dollar Index relevant levels
At the moment, the pair is retreating 0.11% at 97.57 and a break below 96.67 (low Jul.18) would aim for 96.46 (low Jun.7) and then 96.04 (50% Fibo of the 2017-2018 drop). On the other hand, the next up barrier is located at 97.92 (monthly high Jul.25) seconded by 98.33 (monthly high Apr.23) and finally 98.37 (2019 high May 23).