US Dollar bounces off lows, still negative near 89.70

  • DXY appears contained near 89.60.
  • US 10-year yields around 2.84%.
  • US CPI next on tap.

The US Dollar Index (DXY) – which tracks the buck vs. its main competitors – remains entrenched into the negative territory today, although it has managed to rebound from daily lows in the vicinity of 89.60.

US Dollar attention to US data

The index appears to have met dip buyers in the 89.65/60 band, or fresh 4-day lows on Tuesday, all against the backdrop of an unabated sentiment in the risk-associated space.

At the same time, DXY is retreating for the second consecutive session so far today, in tandem with the softer tone in yields of the key US 10-year reference, which have receded from yesterday’s multi-year tops in the 2.90% neighbourhood.

While market participants continue to adjust to the prospects of further tightening by the Federal Reserve – with the first rate hike this year expected next month – tomorrow’s release of January’s inflation figures and retail sales should add (or not) some details/fundamentals into that view.

In this regard, CME Group’s FedWatch tool now sees the probability of a 25 bp rate hike at the Fed’s meeting on March 20-21 at 77.5%, a tad higher than Monday’s reading.

US Dollar relevant levels

As of writing the index is losing 0.44% at 89.67 facing the immediate support at 88.55 (low Feb.2) seconded by 88.42 (2018 low Jan.25) and finally 86.85 (weekly trend line off 72.70). On the upside, a break above 90.57 (high Feb.8) would target 90.70 (high Jan.22) en route to 90.98 (high Jan.18).