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US Dollar Index on the defensive, parked near 96.70

  • The demand for the buck remains subdued today.
  • US-China trade hopes keep weighing on USD.
  • US markets are closed due to the President’s Day holiday.

The greenback, in terms of the US Dollar Index (DXY), remains on the defensive and so far unable to pick up any serious pace around the 96.70 region.

US Dollar Index weak on risk-on mood

The index remains depressed and under pressure, prolonging the correction lower from Friday’s fresh yearly peaks in the vicinity of 97.40, always against the backdrop of thin trade conditions due to the holiday in the US markets.

In fact, the greenback is down for yet another session today and flirting with the 10-day SMA in the 96.70 region. The downside pressure in the buck has been intensifying as of late in light of the recent progress at the US-China trade talks, which are set to resume later this week in Washington.

In the US calendar, the next significant event will be the publication of the FOMC minutes on Wednesday, seconded by the key Philly Fed index on Thursday, all along a slew of Fed speakers.

What to look for around USD

Market participants have considered as positive the recent developments from the US-China negotiations in Beijing ahead of this week’s further talks in Washington. In the meantime, investors will remain vigilant on upcoming results on US calendar and the release of the FOMC minutes. Despite market participants are holding on to the idea of a potential slowdown in the US economy in the next months, the deterioration in overseas fundamentals in combination with ‘softer’ stance in G10 central banks keeps occasional dips in the buck somewhat shallow. This view is reinforced by rising scepticism over a potential halt in the Fed’s tightening cycle this year.

US Dollar Index relevant levels

At the moment, the pair is losing 0.22% at 96.71 and a break below 96.65 (low Feb.18) would open the door to 96.42 (55-day SMA) and finally 96.31 (21-day SMA). On the other hand, the next hurdle emerges at 97.37 (2019 high Feb.15) followed by 97.71 (2018 high Dec.14) and then 97.87 (monthly high Jun.20 2017).