US Dollar Index eases from tops near 96.80 on trade concerns

• The index clinched highs near 96.80 and drops afterwards.
• Yields of US 10-year note tumble to lows near 2.66%.
• Markets focused on upcoming Fedspeak.

The greenback, in terms of the US Dollar Index (DXY), is now losing the grip after climbing as high as the vicinity of 96.80, or session peaks.

US Dollar Index focused on Fedspeak

The index lost upside momentum soon after hitting daily highs at the key 200-day SMA just below 96.80, all in response to the knee-jerk in USD/JPY on renewed trade jitters.

In fact, latest news said the EU could target Caterpillar, Samsonite and Xerox if the US imposes tariffs on imports of autos from the European Union.

The bout of selling pressure is being accompanied by the drop in yields of the US 10-year reference to the area of daily lows around 2.66%.

In the US data space, the greenback will be in the centre of the debate later in the session, as VP R.Clarida (permanent voter, dovish) and NY Fed J.Williams (permanent voter, centrist) will discuss inflation in New York. In addition, St. Louis fed J.Bullard (voter, dovish), Philly Fed P.Harker (non voter, dovish) and R.Quarles (permanent voter, centrist) will take part in a panel discussion on the balance sheet.

What to look for around USD

The FOMC minutes were not as dovish as expected. In fact, the Committee signalled the recent shift in the Fed’s stance was not associated to weakness in the economy but to rising uncertainty in the global markets. Despite the low inflation was back on the debate, the Fed did not rule out further hikes later in the year, although a move on rates remains highly data dependent. On another front, the US-Sino trade talks remain the almost exclusive driver for the markets’ mood in the near term. Furthermore, the deterioration in overseas fundamentals in combination with ‘softer’ stance in G10 central banks should keep occasional dips in the buck somewhat shallow.

US Dollar Index relevant levels

At the moment, the pair is losing 0.02% at 96.59 and a breach of 96.29 (low Feb.20) will target 96.22 (38.2% Fibo of the September-December up move) en route to 95.59 (200-day SMA). On the upside, the next hurdle emerges at 96.80 (10-day SMA) followed by 97.09 (high Feb.19) and then 97.37 (2019 high Feb.15).