US Dollar Index clings to gains near 97.20

• DXY fades the earlier spike near 97.30.
• Yields of the 10-year note edge higher, near 2.07%.
• US Philly Fed crushed estimates at 21.8 in July.

The US Dollar Index (DXY), which tracks the greenback vs. a basket of its  main competitors, is now returning to the 97.20 area after climbing near 97.30 earlier in the day.

US Dollar Index stays bid post-Philly

The index is struggling for direction following Wednesday’s negative performance despite the key Philly Fed Manufacturing Index came in well above estimates at 21.8 for the current month (from June’s 0.3). Further positive results came in from Initial Claims, rising at a weekly 216K and taking the 4-Week Average to 218.75K from 219.00K.

The greenback saw its weekly up move trimmed yesterday in response to the pronounced decline in yields of the 10-year note to the 2.04% following fresh Trump-led concerns on the US-China trade front.

In spite of the recent knee-jerk to the vicinity of the 97.00 mark, the buck manages to keep the weekly constructive note on the back of somewhat alleviated speculations of a 50 bps rate cut by the Fed at next week’s meeting.

What to look for around USD

DXY has recovered some composure after once again testing the vicinity of the 200-day SMA in the 96.70 region on Friday, all in response to the dovish message from Chief Powell and the FOMC minutes. Speculations among investors have already priced in a 25 bps rate cut hits month, although a bigger rate cut is not utterly ruled out just yet. Trade tensions and global growth concerns continue to cloud the US outlook while the lack of upside traction in inflation remains worrisome. Confronting this scenario, the greenback still looks underpinned by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals when compared to its G10 peers and the shift to a more accommodative stance from the rest of the central banks.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.02% at 97.20 and faces the next hurdle at 97.59 (high Jul.9) followed by 97.80 (monthly high Jun.3) and finally 98.37 (2019 high May 23). On the flip side, a breakdown of 96.80 (200-day SMA) would aim for 96.46 (low Jun.7) and then 96.04 (50% Fibo of the 2017-2018 drop).