US Dollar Index under pressure below 98.00 ahead of ISM

• The index comes under pressure and breaks below 98.00.
• Yields of US 10-year note breach the 1.80% handle.
• US ISM Non manufacturing, Fedspeak next on tap.

The greenback, in terms of the US Dollar Index (DXY), is adding to Friday’s losses and is testing fresh lows in the sub-98.00 area ahead of the opening bell in Euroland.

US Dollar Index weaker on declining yields

The index is down for the third session in a row on Monday on the back of the continuation of the down move in yields of the key US 10-year note, which are navigating sub-1.80% levels, area last seen in November 2016.

President Trump’s recent announcements of extra tariffs of 10% on Chinese products worth $300 billion keeps hurting the sentiment in the global markets and is sustaining the ongoing exodus to safer assets (bonds, JPY). The US –China trade front has once again come to the fore as barometer of price action while investors continue to wait for some form of Chinese retaliation, which would only make things worse.

Later in the day, July’s ISM Non-manufacturing will be the only release of note in the NA session seconded by the speech by FOMC’s L.Brainard (permanent voter, dovish) on the Payment System.

What to look for around USD

The fresh bout of US tariffs on Chinese products has undermined the Fed-led rally in the buck to levels last seen in May 2017 beyond 98.00 the figure and eclipsed at the same time the mixed report from US Non-farm Payrolls for the month of July. By the same token, yields of the US 10-year benchmark have dropped to November 2016 levels in the sub-1.80% area. In the meantime, the US-China trade war is expected to remain the almost exclusive driver of the global sentiment for the time being. Regarding the greenback, its demand appears propped up by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals and the less dovish stance from the Federal Reserve.

US Dollar Index relevant levels

At the moment, the pair is losing 0.17% at 97.93 and a breakdown of 97.55 (21-day SMA) would open the door to 96.92 (200-day SMA) and then 96.67 (low Jul.18). On the flip side, the next up barrier aligns at 98.93 (2019 high Aug.1) seconded by 99.89 (monthly high May 2017) and finally 100.00 (psychological level).