US Dollar Index eases from tops, around 99.70

• The index gives away initial gains and returns to 99.70.
• Market’s focus remains on the re-opening of the US economy.
• Fedspeak, CPI, Powell, Claims, U-Mich of note in the docket.

The greenback, tracked by the US Dollar Index (DXY), is correcting lower to the 99.70/60 band after hitting tops near 99.90 during early trade.

US Dollar Index focused on risk, coronavirus

The index is reversing two consecutive daily pullbacks, as market participants continue to evaluate the potential re-opening of the US economy.

In fact, as the advance of the coronavirus in the US is losing traction, many states continue to make preparations for an imminent resumption, albeit at a gradual pace, of the economic activity.

On another front, the US-China trade tensions appear somewhat mitigated following last week’s news that a probable meeting between both parties is likely in the near-term. The trade scenario, however, looks fragile in light of the persistent criticism by President Trump over China’s handling of the coronavirus crisis.

Later in the docket, Chicago Fed C.Evans (2021 voter, centrist) and Atlanta Fed R.Bostic (2021 voter, centrist) are due to speak.

Moving forward, inflation figures gauged by the CPI are due along with Chief Powell’s testimony, weekly Initial Claims and the preliminary print of the U-Mich index.

What to look for around USD

The greenback came under renewed downside pressure in the second half of last week on the back of the improved mood in the risk-complex and following a poor print from US Payrolls. In the meantime, investors have now shifted the attention to the US-China trade war, while the country keeps planning the gradual re-opening of the economy. Supporting the momentum around the greenback emerges the current “flight-to-safety” environment, helped by its status of “global reserve currency” and store of value. On another front, and following the FOMC event, the Fed is expected to stay on the loose end of the monetary policy stance, at least until the coronavirus crisis abates.

US Dollar Index relevant levels

At the moment, the index is gaining 0.60% at 99.70 and a break above 100.40 (weekly high May 7) would open the door to 100.49 (78.6% Fibo of the 2017-2018 drop) and finally 100.93 (weekly/monthly high Apr.6). On the downside, immediate contention is located at 98.57 (weekly low May 4) followed by 98.37 (200-day SMA) and then 97.87 (61.8% Fibo of the 2017-2018 drop).