US Dollar Index looks to extend the up move near 98.70

• DXY clings to gains above 98.60 on Tuesday.
• Yields of the US 10-year note rebound from sub-1.70%.
• S&P/Case-Shiller Index, Consumer Confidence next on tap.

The Greenback, in terms of the US Dollar Index (DXY), is looking to add to the weekly gains near 98.70 ahead of the opening bell in the Old Continent.

US Dollar Index focused on data

The index is navigating the area of multi-day highs around 98.70 following a promising start of the week. In fact, better-than-expected PMIs readings for the current month released on Monday helped alleviate fears of a US recession, adding to the buck’s positive performance.

The Dollar’s recovery comes in tandem with declining US yields, with the 10-year note shedding further ground although meeting contention in sub-1.70% levels for the time being.

In the meantime, all eyes are upon the upcoming resumption of trade talks between US and China. Rumours about the likeliness of a partial agreement at the meetings have been slashed after President Trump once again reiterated that he expects a ‘complete deal’ after ruling out he needs a deal before the 2020 elections. Trump’s comments have tempered the rising optimism ahead of the fresh negotiations and added to the already mounting skepticism around the events.

Later in the US docket, house prices tracked by the S&P/Case-Shiller Index are due ahead of the more relevant Consumer Confidence gauge by the Conference Board.

What to look for around USD

The index has been managing well to keep the trading range above the 98.00 barrier in past sessions. Market participants have already digested the recent FOMC event and appear to have shifted their focus to the US-China trade war once again. Domestic data in combination with politics and trade developments should be key in determining the next decision on rates after Fed’s Powell left the door open for extra easing along the road. However, the increasing dissent among FOMC members casts further clouds on the probability of extra stimulus at the upcoming meetings, leaving the outlook on interest rates quite mixed, to say the least. Looking at the broader picture, the positive view on the Dollar is still well underpinned by the solid US labour market, strong consumer confidence and spending and the auspicious pick up in consumer prices, all adding to the safe haven appeal and the status of ‘global reserve currency’. 

US Dollar Index relevant levels

At the moment, the pair is gaining 0.05% at 98.66 a break above 99.10 (high Sep.12) would aim for 99.37 (2019 high Sep.3) and then 99.89 (monthly high May 11 2017). On the downside, the immediate support lines up at 97.86 (monthly low Sep.13) followed by 97.62 (100-day SMA) and finally 97.17 (low Aug.23).