US Dollar Index lingers over 99.00 ahead of FOMC

October 9, 2019 Off By admin-445
  • DXY manages to keep the trade above the 99.00 handle.
  • Powell said the Fed will restart growing its balance sheet again.
  • FOMC minutes will be the salient event later today.

The Greenback, when tracked by the US Dollar Index (DXY), is exchanging gains with losses around the 99.00 handle, trading within a very tight range ahead of the opening bell in Europe.

US Dollar Index now focused on FOMC, trade

The index is looking to add to the positive start of the week, which saw the buck regain some ground lost after bottoming out near 98.60 early in the month.

The cautious tone around the Greenback is expected to remain well in place ahead of the publication of the FOMC minutes of the latest meeting, where the Fed cut the FFTR by another 25 bps.

Further news around the buck cited Chief Powell saying the Fed will re-start the purchase of bonds to alleviate the pressure surrounding the repo markets.

In addition, investors keep waiting for the resumption of US-China trade talks (Thursday and Friday) amidst rising expectations as well as skepticism over the likelihood of some progress in the negotiations. Recent news regarding fresh restrictions of US capital inflows into China has also dented the mood on the trade front.

On the data space, JOLTs Job Openings is due later seconded by Wholesale Inventories and the EIA weekly report, all ahead of the release of the FOMC minutes.

What to look for around USD

The Greenback has started the week on a better mood and it has managed to regain the 99.00 neighbourhood. Renewed US recession jitters and Fed easing chatter weighed on the buck during last week, particularly after the awful prints from the ISM gauges and the mixed employment report for the month of September. In the very near term, investors’ focus will be on today’s FOMC minutes and US-China high-level trade talks (Thursday and Friday). Despite evidence that the US economy could be losing some momentum, the labour market remains strong as well as consumer spending, while the recent pick up in inflation adds to the auspicious domestic scenario vs. the generalized slowdown in most of overseas economies. On the broader view, the constructive outlook in DXY looks a bit damaged but it still is in play amidst a divided FOMC vs. a broad-based dovish stance from the rest of the G-10 central banks. In addition, the positive view on USD remains well sustained by its safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is losing 0.01% at 99.12 and faces the next support at 98.76 (21-day SMA) seconded by 98.34 (55-day SMA) and finally 97.86 (monthly low Sep.13). On the upside, a breakout of 99.67 (2019 high Oct.1) would aim for 99.89 (monthly high May 11 2017) and then 100.00 (psychological handle).