US Dollar Index flirting with daily highs near 98.50

• DXY regains poise and challenges the 98.50 region.
• Decent support emerges in the boundaries of the 98.00 mark.
• US Core PCE rose below estimates 0.1% MoM and 1.6% YoY.

The greenback, when tracked by the US Dollar Index (DXY), has regained the positive ground and is now holding on to the 98.50 region.

US Dollar Index ignores data, looks to coronavirus

The index has managed to not only reverse the initial pessimism that dragged the buck to lows near 98.00 the figure, but also to regain traction and return to the upper end of the range near 98.50, all amidst alternating risk appetite trends and despite unabated concerns around the coronavirus.

In the data space, inflation figures measured by the PCE showed prices rose 0.1% on a monthly basis in January and 1.7% from a year earlier, while prices gauged by the Core PCE gained 0.1% inter-month and 1.7% on a yearly basis.

Extra data showed Personal Income rising above estimates 0.6% MoM and Personal Spending expanding less than forecasted 0.2% MoM. Later in the day, the final U-Mich index is due seconded by the Chicago PMI and the weekly report on US oil rig count by Baker Hughes.

What to look for around USD

The index charted the largest single-day drop since late August 2019 on Thursday, as markets remain in panic-mode in response to the advance of the COVID-19 outside of China, which at the same time re-ignited speculations that the Fed could move on rates in the very near-term. The outlook on the buck now looks somewhat compromised: despite further retracements are not ruled out, its outlook still appears constructive and bolstered by the current “appropriate” monetary stance from the Fed (once again confirmed at the FOMC minutes last week) vs. the broad-based dovish view from its G10 peers, the “good shape” of the domestic economy, the buck’s safe haven appeal and its status of “global reserve currency”.

US Dollar Index relevant levels

At the moment, the index is gaining 0.04% at 98.43 and faces the next support at 98.02 (weekly lows Feb.28) seconded by 97.83 (200-day SMA) and then 97.75 (61.8% Fibo retracement of the 2020 rally). On the flip side, a breakout of 99.09 (23.6% Fibo retracement of the 2020 rally) would open the door to 99.91 (2020 high Feb.20) and finally 100.00 (psychological barrier).