After plummeting to its lowest level in 10 months at 94.80, the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, started to retrace its losses towards the 95 handle and is now moving around that level, gaining a modest 0.1% on the day.
The greenback's price action on the first trading of the day seems to be technical. Although the drop witnessed in the early NA session came after the Empire State Manufacturing Index disappointed investors, there were no fundamental developments that fueled the recovery. Moreover, the fact that the index is struggling to extend this move supports the view that it is merely technical. "The markets are not convinced the Fed is going to be tightening rates anytime soon, in that kind of an environment, the dollar is struggling," Vassili Serebriakov, FX strategist at Credit Agricole in New York told Reuters.
On the other hand, the bond market, which usually impacts the DXY movements in the NA session, fails to provide a catalyst as the 10-year U.S. Treasury bond yield remains virtually flat on the day while the 2-year reference is up only 0.5%.
Tomorrow's economic calendar will be featuring Import & Export Price Index numbers from the U.S., which usually don't cause any sharp fluctuations in the markets. In fact, the whole week will be very insignificant for the greenback data wise. Additionally, the Fed's blackout period, in which FOMC members don't talk about the monetary policy, started, making it even more difficult for the DXY to find direction.
Technical outlook
With a daily close above the 95 handle, the index could aim for 95.60 (Jul. 14 high), 96.25 (Jul. 5 high) and 97.15 (Jun. 26 high). On the downside, supports could be seen at 94.80 (daily low), 94 (psychological level) and 93.05 (Jun. 23, 2016, low).
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