US Dollar Index flirting with daily lows in sub-96.00 zone

• The index is losing further ground and drops below the 96.00 handle.
• Yields of the US 10-year note climb to fresh tops beyond 2.72%.
• US Retail Sales, Trade Balance, Fed’s Beige Book next on tap.

The US Dollar Index (DXY), which gauges the greenback vs. its main rivals, is trading on a soft note today below 96.00 after clinching fresh weekly peaks near 96.30 on Tuesday.

US Dollar Index looks to data

The greenback gathered further steam on Tuesday following the dovish message from ECB’s President Mario Draghi at his speech before the European Parliament. Draghi noted the economy in the region is facing a slowdown that could be longer than expected, stressing at the same time the central bank remains ready to act in case it morphs into a recession.

However, DXY failed to sustain the up move on the back of unexpected comments from KC Fed E.George (voter), considered the most hawkish member of the FOMC, as she favoured a pause in the Fed’s tightening cycle.

Back to the US calendar, December’s Retail Sales will be in centre stage later today seconded by Factory Orders, Trade Balance figures, Durable Goods Orders and the regional economic views from the Fed’s Beige Book.

What to look for around USD

The ongoing negotiations around the US-China trade dispute and the continuation of the partial shutdown in the US government have been relegated to the backburner for the time being. Instead, investors are paying more attention to the renewed ‘flexible and patient’ stance from the Federal Reserve (as per latest FOMC minutes and recent Fedspeak) and the potential re-pricing of the Fed’s tightening cycle. In this regard, the health of the domestic economy should remain under scrutiny amidst the enhanced ‘data-dependency’ stance of the Fed.

US Dollar Index relevant levels

At the moment, the pair is losing 0.09% at 95.88 facing the next contention at 95.78 (10-day SMA) seconded by 95.03 (2019 low Jan.3) and finally 94.97 (200-day SMA). On the upside, a break above 96.26 (high Jan.15) would target 96.61 (55-day SMA) en route to 96.96 (2019 high Jan.2).