US Dollar Index flirts with 97.00 post-CPI, looks to FOMC

• The index remains on the defensive in sub-97.00 levels.
• US headline CPI rose 0.4% MoM in March, above estimates.
• Focus will now shift to the FOMC minutes.

After testing lows in the 96.90/85 band, the greenback is now attempting to regain the key 97.00 handle when measured by the US Dollar Index (DXY).

US Dollar Index now looks to FOMC

The demand for the greenback remains depressed so far this week, forcing the index to recede from last week’s tops in the mid-97.00s to earlier lows in the vicinity of the 21-day SMA near 96.80.

In the meantime, the buck remained apathetic after mixed readings from inflation figures tracked by the CPI during last month. In fact, headline consumer prices rose at a monthly 0.4% and 1.9% from a year earlier, while prices stripping food and energy costs rose 0.1% MoM and 2.0% on a yearly basis, these last prints missing consensus.

Looking ahead, the FOMC will publish its minutes from the last meeting. Investors should remain vigilant on the Committee’s views on the prospects for economic growth, the balance sheet reduction and potential rate cuts in the longer run.

What to look for around USD

DXY keeps tracking the broad risk appetite trends while headlines coming from the US-China/US-EU trade fronts also collaborate with the price action. In addition, positive results in the US calendar have been also fuelling the upside in DXY to 97.00 and beyond in past sessions. Today’s FOMC minutes are expected to shed details on the potential discussion of a re-assessment of the Fed’s monetary policy, particularly any mention of probable rate cuts if the outlook deteriorates. Market participants, in the meantime, continue to adjust to the prospects of no hikes from the Fed this year and just one probable rate raise in 2020. Additionally, the buck’s safe haven appeal and widening rate differentials vs. its peers keep propping up the underlying constructive bias in the index.

US Dollar Index relevant levels

At the moment, the pair is retreating 0.02% at 97.02 and faces initial contention at 96.84 (21-day SMA) seconded by 96.62 (55-day SMA) and finally 95.74 (low Mar.20). On the other hand, a break above 97.52 (high Apr.2) would expose 97.71 (2019 high Mar.7) and finally 97.87 (monthly high Jun.20 2017).