US Dollar Index comes all the way down near 97.10

• DXY remains under pressure and approaches 97.00.
• Growth fears dragged US 10-year yields to 2.07%.
• FOMC’s Bullard said a rate cut ‘may be warranted soon’.

The greenback is now trading within a sideline theme in the 97.15/10 band when tracked by the US Dollar Index (DXY).

US Dollar Index looks to data, Powell

The index is navigating fresh 3-week lows following the deep sell-off from last week’s tops in the 98.20/30 band.

Global growth fears have been dragging yields of the US money markets, particularly the 10-year benchmark, to levels last seen in September 2017 near the 2.07% handle, intensifying the inversion of the 3M-10Y yield curve at the same time.

In addition, further weakness hit the buck after St. Louis Fed J.Bullard said at the beginning of the week that an interest rate cut ‘may be warranted soon’ against the backdrop of rising trade tensions and lack of upside traction in inflation.

In the US data space, April’s Factory Orders is coming up later in the day, while NY Fed J.Williams (permanent voter, centrist) will speak at a Conference on ‘Reforming Bank Culture’, Chief J.Powell will discuss policy strategy at the Chicago Fed Conference and FOMC’s L.Brainard will moderate a panel at the same event in Chicago.

What to look for around USD

The greenback is suffering markets’ perception of a potential rate cut by the Federal Reserve in light of the persistent decline of US yields, increasing trade tensions, the inversion of the 3M-10Y yield curve and dovish Fedspeak. In the meantime, trade fears have moved from US-China to US-Mexico following recent Trump’s threats, all adding to the idea that a global slowdown is in the offing. However, the Fed remains patient for the time being, closely watching critical upcoming data releases.

US Dollar Index relevant levels

At the moment, the pair is losing 0.03% at 97.19 and a drop below 97.11 (low Jun.3) would open the door for 96.94 (100-day SMA) and then 97.03 (low May 13). On the upside, the next hurdle emerges at 97.39 (55-day SMA) seconded by 98.28 (high May 30) and finally 98.37 (2019 high May 23).