US Dollar Index around 97.50 ahead of Powell, FOMC

• DXY looks directionless in the mid-97.00s, focused on Powell.
• Yields of the US 10-year note approach the 2.10% area.
• Powell’s testimony, FOMC minutes next of relevance today.

The greenback, tracked by the US Dollar Index (DXY), is trading without clear direction on Wednesday around the 97.50 area.

US Dollar Index focused on Powell, FOMC

After four consecutive daily advances, the index now appears to have entered into a ‘pause mode’ as markets get ready for key events later in the session: the testimony by Chief Jerome Powell before House Financial Services Panel and the release of the FOMC minutes from the June meeting, all surrounding one crucial issue: the likeliness of a rate cut as early as this month and the probable steps towards a looser stance from the Fed.

In the meantime, higher US yields continue to underpin the up move in the buck, which is already navigating the area of 3-week highs in the 97.50/60 band. DXY gained extra steam following the recent breakout of the 100-day SMA (97.10) and the 55-day SMA (97.33), adding to last week’s breakout of the critical 200-day SMA.

Additionally, today’s docket will bring in the speech by St.Louis Fed J.Bullard (voter, dovish) and the release of the weekly report on US crude oil inventories by the EIA.

What to look for around USD

The solid print from June’s Payrolls added extra wings to the positive performance of the greenback in the last couple of weeks, exacerbated by the breakout of the critical 200-day SMA and the multi-month resistance line, all in the 96.60 region. Today, all eyes will be on Chief Powell’s testimony and the FOMC minutes against the backdrop of now shrinking speculations of a 50 bps rate cut in the very near term. DXY, in the meantime, appears supported by rising yields, solid fundamentals – despite the lack of sustainable upside traction in inflation – the safe have appeal of the buck and its status of ‘global reserve currency’; while deceleration in overseas economies and the shift to a more accommodative stance from Fed’s peers also collaborate with the upbeat mood in USD. On the negative side, it will be interesting to gauge the impact (if any at all) of President Trump’s criticism to the Fed’s policy on the views of the Committee. In addition, swelling scepticism around the resumption of the US-China trade talks could also hamper further gains.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.01% at 97.51 and faces the next up barrier at 97.59 (high Jul.9) followed by 97.80 (monthly high Jun.3) and finally 98.37 (2019 high May 23). On the downside, a breakdown of 97.33 (55-day SMA) would aim for 96.68 (200-day SMA) and then 96.46 (low Jun.7).