US Dollar Index loses momentum and tests 98.50

The US Dollar Index (DXY), which tracks the buck vs. a bundle of its main rivals, is now giving away some gains and slipping back to the 98.50 region.

US Dollar Index follows yields lower

The index is now facing some selling mood after hitting fresh multi-week tops beyond 98.60 during early trade.

The ongoing correction lower comes in tandem with the down tick in yields of the ey US 10-year reference to the 1.51%, some 3 bps lower than earlier tops.

In today’s US data space, inflation measured by the Core PCE rose at a monthly 0.2% in July and 1.6% over the last twelve months. Additionally, Personal Income expanded 0.1% MoM and Personal Spending 0.6% MoM during the same period.

Later, and closing the docket, the final gauge of the Consumer Sentiment for the current month is due.

What to look for around USD

The inversion of the yield curve in combination with trade headlines keep driving the mood in the Greenback amidst concerns of an upcoming recession in the US economy at some point in the next couple of years. In the meantime, the solid labour market, strong consumer confidence and positive GDP readings appears to contradict this view for the time being, while inflation is seeing regaining upside traction in the near term. Powell recently reiterated that the Fed ‘will act as appropriate to sustain the expansion’, leaving the door open for probable rate cuts at the September/October meetings at his speech at the Jackson Hole Symposium, although he did not unveil any reaction function regarding the interest rate path for the upcoming months.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.04% at 98.49 and faces the next hurdle at 98.61 (high Aug.30) seconded by 98.93 (2019 high Aug.1) and then 99.89 (monthly high May 11 2017). On the other hand, a breach of 97.92 (21-day SMA) would open the door to 97.17 (low Aug.23) and finally 97.03 (200-day SMA).