US Dollar Index recedes from yearly highs around 97.20

• DXY picks up pace and surpass 97.00.
• US 10-year yields rebound beyond 1.80%.
• US ADP report came in at 202K in December.

The greenback, when gauged by the US Dollar Index (DXY), keeps the positive momentum and advances to fresh 2019 highs in the 97.20/25 band.

US Dollar Index stronger on US-Iran, data

The index is posting gains for the second session in a row on Tuesday, managing to reclaim the 97.00 handle and advance further north to fresh so far yearly peaks beyond 97.20.

Alleviated concerns in the Middle East despite Tuesday’s missile attack to American forces in Iraq have been sustaining the bullish move in the buck as well as the rebound in US yields to fresh tops above 1.80%.

In addition, the ADP report showed the US private sector created 202K jobs during last month, more than initially estimated. December’s reading was also revised up to 124K jobs (from 67K jobs). This positive result adds to Tuesday’s better-than-expected trade balance figures, ISM Non-Manufacturing and Factory Orders, all supportive of a stronger buck.

Later in the day, FOMC’s L.Brainard (permanent voter, dovish) is due to speak ahead of the EIA’s weekly report on US crude oil inventories.

What to look for around USD

The index has rebounded from 5-month lows near 96.30 in past sessions, although it has so far failed to extend the recovery further north of the 97.00 barrier on a sustainable basis. In the meantime, geopolitics – with US and Iran in centre stage – continue to dominate the headlines seconded by the imminent sign of the ‘Phase One’ deal with China. In spite of the recent weakness, the constructive view on the dollar remains unaltered and stays underpinned by the so far ‘wait-and-see’ stance from the Fed vs. the broad-based dovish view from its G10 peers, the dollar’s safe haven appeal and its status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the index is gaining 0.18% at 97.14 and a breakout of 97.23 (2020 high Jan.8) would open the door to 97.69 (200-day SMA) and finally 97.87 (61.8% Fibo of the 2017-2018 drop). On the downside, immediate contention emerges at 96.36 (monthly low Dec.31) seconded by 96.04 (50% Fibo of the 2017-2018 drop) and then 95.84 (monthly low Jun.25 2019).