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09.01 – The US Dollar trades in the green while equities retreat

The US Dollar (USD) trades broadly steady on Tuesday’s European morning, posting gains against most G20 currencies. Still, measured by the DXY US Dollar Index, the Greenback was easing a touch as a firm risk-on tone returned on Monday in US equity markets. Asian stocks took over the mood on Tuesday, with the Japanese Nikkei Index posting a fresh 34-year high at the closing bell. On the economic front, another light agenda is due on Tuesday, with only second-tier data releases. Traders will be on the lookout to hear Federal Reserve’s Vice Chairman Michael Barr speak later this Tuesday. There are no big catalysts on the docket in the runup to the US Consumer Price Index (CPI) report on Thursday.

The US Dollar is in the green this Tuesday, though be it marginally against most major peers. This makes the US Dollar Index (DXY) look like a standstill, as safe-haven inflows on the back of geopolitical tensions are being matched by the risk-on tone that triggered US Dollar selling. Ahead of the key inflation data on Thursday, the US Dollar isn’t likely to move much unless an unexpected big catalyst or a major breaking news headline moves the needle. In the DXY US Dollar Index, the first level on the upside is 103.00, which falls nearly in line with the descending trend line from the top of October 3 and December 8. Once broken and closed above there, the 200-day Simple Moving Average (SMA) at 103.43 comes into play. The 104.00 level might be too far off, with 103.93 (55-day SMA) coming in as the next resistance. To the downside, the rejection on the descending trendline is giving fuel to the Greenback bears for further downturn. The line in the sand here is 101.74, the floor which held halfway through December before breaking down in the last two weeks. In case the DXY snaps this level, expect to see a test at the low near 100.80.