US Dollar bid around 95.50, eyes on ISM

The US Dollar Index – which tracks the buck vs. its main competitors – is adding to Friday’s gains around the 95.5/60 band ahead of key US data.

US Dollar focus on ISM

The index is advancing for the second consecutive session so far, testing the mid-95.00s and looking to extend further the rebound from last week’s multi-month lows near 95.20 (Friday).

The recent positive performance from yields in the US money markets has been lending oxygen to the buck, with the 10-year reference briefly testing tops near 2.33% during overnight trade albeit easing some ground afterwards.

USD remains under pressure nonetheless despite the Federal Reserve has already hiked rates twice this year and prospects keep pointing that a third hike is well on the table. According to CME Group’s FedWatch tool, the probability of a rate raise at the December meeting stays just below 50% based on Fed Funds futures prices.

The shift to a more aggressive tone from the BoE, BoC and the ECB during last week’s ECB Forum has also put the buck under extra pressure. That, plus the (almost) omnipresent effervescence in the US political scenario should stay the main headwinds for the greenback in the months to come.

On the positioning front, the speculative community has scaled further back its USD net long position to levels last seen in mid-June 2016 around 5.4K contracts in the week to June 27, as per the latest CFTC report.

In the data space, St. Louis Fed J.Bullard (2019 voter, centrist) is due to speak in London ahead of June’s ISM manufacturing, expected later during the NA trading hours.

US Dollar relevant levels

The index is gaining 0.17% at 95.55 and a breakout of 96.32 (high Jun.28) would target 96.42 (10-day sma) and then 97.25 (23.6% Fibo of 103.81-95.22). On the flip side, the immediate support aligns at 95.22 (2017 low Jun.30) followed by 94.95 (low Sep.22 2016) and finally 94.05 (low Aug.18 2016).