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US Dollar Index: DXY bears shrug off mildly bid Treasury yields ahead of ISM PMI

  • DXY remains pressured after two-day downtrend even as US Treasury yields consolidate Friday’s losses.
  • Upbeat market sentiment, mixed US jobs report weigh on the greenback back.
  • Full markets, US ISM Services PMI for June eyed for fresh impulse.

US dollar index (DXY) stays depressed for the third consecutive day even since the US jobs report disappointed Fed hawks on Friday. That said, the greenback gauge versus six major currencies drop to 92.22, down 0.05% intraday, by the press time of Tuesday’s Asian session.

The US dollar’s safe-haven appeal seems to back the DXY bears of late. Among the key catalysts, the coronavirus (COVID-19) optimism at the UK and Germany, as well as receding odds of the Fed’s rate hike or tapering moves, gain major attention.

However, fears of the new covid strain, namely Epsilon, which resists vaccines joins the covid woes in Australia and Japan keeps DXY bulls hopeful. Also, the return of the US traders after a long weekend may add buying bets onto the greenback ahead of the key ISM Services PMI for June and the Federal Open Market Committee (FOMC) minutes.

Amid these plays, S&P 500 Futures print mild gains while the US 10-year Treasury yield also gains 1.2 basis points (bps) to consolidate Friday’s losses around 1.43% by the press time. Although the US dollar has a positive correlation with the T-bond yields, the latest divergence could be tracked to the market’s indecision and cautious moves before the key data/events.

Moving on, ISM Services PMI for June, expected 63.5 versus 64.0 prior, will be watched closely for fresh impulse as DXY bulls seek a strong inflation hint to retake the controls. Following that, the FOMC minutes will be observed to gauge the divide among the Federal Reserve policymakers to justify the market’s hopes of monetary policy consolidation.

Read: ISM Services PMI Preview: Why the inflation component could trigger a dollar rebound

Technical analysis

A downside break of a three-week-old ascending trend line and early June tops back DXY bears aiming for a 200-DMA level of 91.41.

 

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