US Dollar Index looks for direction near 99.50 ahead of FOMC, data
- DXY trades in the vicinity of recent YTD highs just below 99.50.
- Coronavirus fears spurred the demand for the dollar on Tuesday.
- FOMC minutes, Producer Prices, housing data, Fedspeak all due later.
The greenback, when measured by the US Dollar Index (DXY), is struggling for direction near 99.50 following the Asian trading session on Wednesday.
US Dollar Index looks to Fed, data
The monthly rally in the index appears far from abated on Wednesday after it clinched fresh YTD highs near 99.50 on Tuesday and is now at shouting distance from 2019 peaks at 99.67 recorded on October 1st.
Renewed jitters around the Chinese coronavirus (COVID-19) encouraged investors to return to the safe haven universe in detriment of recent bets favouring riskier assets, all morphing into extra wings for the buck and dragging US yields lower.
Later in the NA session, the focus of attention will be on the publication of the FOMC minutes. Seconded in relevance will come Housing Starts and Building Permits along with Producer Prices for the month of January.
Additionally, Atlanta Fed R.Bostic (2021 voter, centrist) will speak on the Economic Outlook in Atlanta, Cleveland Fed L.Mester (voter, hawkish) will speak at a Forum of Executive Women, Minneapolis Fed N.Kashkari (voter, dovish) speaks in Minnesota, Dallas Fed R.Kaplan (voter, hawkish) speaks in Dallas and Richmond Fed T.Barkin (2021 voter, centrist) will discuss the Monetary Policy Framework.
What to look for around USD
The index has extended the march north to new 2020 highs near 99.50 on Tuesday, keeping the bid bias unaltered for the time being. Investors are expected to keep looking to the performance of US fundamentals and the broader risk appetite trends for direction as well as any fresh developments from the COVID-19. In the meantime, the outlook on the dollar remains constructive and bolstered by the current “appropriate” monetary stance from the Fed vs. the broad-based dovish view from its G10 peers, the “good shape” of the domestic economy, the buck’s safe haven appeal and its status of “global reserve currency”.
US Dollar Index relevant levels
At the moment, the index is gaining 0.01% at 99.45 and a breakout of 99.47 (2020 high Feb.18) would aim for 99.67 (2019 high Oct.1) and finally 100.00 (psychological barrier). On the flip side, immediate contention emerges at 98.75 (23.6% Fibo retracement of the 2020 rally) seconded by 98.54 (monthly high Nov.29 2019) and then 98.40 (21-day SMA).