US Dollar Index keeps the 98.00 handle post-GDP

• DXY reverses knee-jerk following GDP release.
• Advanced US Q1 GDP came in at 3.1%.
• Pending Home Sales coming up next in the calendar.

The US Dollar Index (DXY), which tracks the buck vs. a bundle of its main competitors, has now regained some traction and looks to the upper end of the range in the 98.20/25 band.

US Dollar Index remains bid post-US data

The index is now adding to weekly gains above 98.00 the figure despite Q1 inflation figures (gauged by the PCE) have disappointed expectations amidst a solid second revision from GDP figures, showing the economy is seeing expanding at an annualized 3.1%.

Additional data saw April’s trade deficit increasing to $72.12 billion, a tad above estimates, while weekly Initial Claims rose 215K and dragged the 4-Week Average to 216.75K from 220.50K.

On the broader universe, US-China trade concerns remain the exclusive driver of the mood in the global markets for the time being along with the sharp decline in US yields seen in past sessions.

Later in the session, Pending Home Sales for the month of April are due seconded by the weekly report on US supplies by the DoE.

What to look for around USD

The greenback has managed well to leave behind poor prints from the docket during last week, which have reignited concerns that a technical recession could develop at some point in 2020. In the meantime, the US-China trade dispute threatens to escalate amidst potential retaliatory measures from China and the utter lack of any progress in the negotiations. On another direction, the FOMC minutes reinforced the ‘patient’ stance from the Federal Reserve and the ‘transitory’ lack of upside momentum in domestic inflation. In addition, the Committee ruled out rate cuts in the next months and left the door open for extra tightening if the economy evolves as planned. That said, dips in DXY should remain somewhat shallow in combination with overseas weakness, the safe haven appeal of the buck, favourable US-G10 yield spreads and the Dollar’s status of global reserve currency.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.04% at 98.17 and faces the next hurdle at 98.37 (2019 high May 23) followed by 99.49 (high May 11 2017) and then 100.49 (78.6% Fibo of the 2017-2018 drop). On the downside, a drop below 97.55 (low May 27) would open the door for 97.32 (55-day SMA) and then 97.03 (low May 13).