US Dollar Index moves to session tops near 97.70

• The index left behind initial pessimism and retests 97.70.
• US yields continue to rebound and support the buck.
• IBD/TIPP index, JOLTS Job Openings coming up next.

The Greenback, when measured by the US Dollar Index (DXY), has regained further composure and manages to retest the area of daily highs around 97.70.

US Dollar Index propped up by yields, Fedspeak

The index rebounded from recent lows in the 97.20 region on the back of some mitigated concerns on the US-China trade front, which in turn encouraged US yields to rebound from multi-year lows.

In this regard, Chinese authorities said the Yuan is unlikely to depreciate further while Director L.Kudlow said that President Trump remains open to resume talks with China and could even consider possible changes on new tariffs. It is worth recalling that talks between both parties could resume next month in the US.

Further out, FOMC’s J.Bullard said interest rates are ‘in right neighbourhood’ and favoured the FOMC to stay out of any trade discussion. In addition FOMC’s Daly added that the recent move on rates by the Fed was justified by global growth headwinds.

Later in the NA session, the IBD/TIPP index is due seconded by JOLTS Job Openings and the speech by FOMC’s L.Brainard.

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 near 99.00 the figure, sparking a sharp leg lower to the area just above the critical 200-day SMA. By the same token, yields of the US 10-year benchmark have dropped to multi-year lows in the sub-1.70% area, where some support appears to have emerged. In the meantime, the US-China trade war is expected to remain the almost exclusive driver of the global sentiment for the time being, although an eventual deal in the next months looks highly unlikely. 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 gaining 0.31% at 97.70 and faces the next up barrier at 97.95 910-day SMA) followed by 98.37 (monthly high May 23) and then 98.93 (2019 high Aug.1). On the flip side, a breakdown of 97.21 (low Aug.6) would open the door to 96.92 (200-day SMA) and then 96.67 (low Jul.18).