US Dollar Index retreats from daily highs, back near 96.50

• The index loses some upside momentum and recedes to 96.55/50.
• US Initial Claims came in at 234K WoW, missing estimates.
• Fed’s VP Richard Clarida is due to speak later in the day.

After climbing as high as the 96.65/70 band in early trade, the greenback has now given away part of those gains and returned to the mid-96.00s when tracked by the US Dollar Index (DXY).

US Dollar Index focused on Fedspeak

The index failed to extend the weekly rally further north of previous peaks in the 96.70 region, sparking instead the current knee-jerk, which is seeing the mid-96.00s once again retested.

Some recovery in the Sterling following the BoE-led sell-off has apparently removed some tailwinds from the buck’s rally, although the underlying tone remains pretty solid.

In the US data space, Initial Claims rose at a weekly 234K, missing consensus while still feeling the impact of the recent US shutdown. Later in the day, Fed’s VP and (mega) dove member Richar Clarida is due to speak.

What to look for around USD

Negative developments overseas vs. decent data releases in the US docket have been sustaining the constructive sentiment in the buck for the past sessions and have somewhat relegated concerns over a more ‘flexible’ Fed to the backseat for the time being. In the very near term, investors are looking to the next Trump-Xi Jinping meeting later in the month following some progress in recent trade talks and positive comments from the Trump administration.

US Dollar Index relevant levels

At the moment, the pair is up 0.18% at 96.55 and a breakout of 96.68 (high Jan.24) would target 96.79 (23.6% Fibo of the September-December up move) en route to 96.96 (2019 high Jan.2). On the downside, immediate contention emerges at 96.22 (100-day SMA) followed by 95.96 (21-day SMA) and finally 95.30 (200-day SMA).