US Dollar Index approaches 98.00 on upbeat US GDP

• DXY moves to monthly highs near 98.00 post-US docket.
• Advanced Q2 GDP came in above estimates at 2.1%.
• Markets are now focused on the upcoming FOMC event.

The greenback remains bid so far this week and is now recording monthly highs just pips shy of the key barrier at 98.00 the figure when measured in terms of the US Dollar Index (DXY).

US Dollar Index pushes higher to 2-month tops

The index is trading just pips away from the key 98.00 barrier at the end of the week, recording at the same time new 2-month peaks.

The buying interest in the buck has accelerated after better-than-expected advanced US Q2 GDP figures showed the economy is seen expanding 2.1% on a yearly basis, mainly on the back of strong consumer spending. Removing some shine from the results, flash Core PCE Prices rose 1.8% vs. 2.0% forecasted.

Today’s results reduced further the bets for a 50 bps interest rate cut by the Fed at next week’s meeting, lending extra legs to the upside momentum in the buck.

What to look for around USD

Investors have already priced in a 25 bps interest rate cut hits month, while a larger rate cut appears to have lost consensus in the last sessions. Trade tensions now look somewhat alleviated after US and China decided to restart talks next week. The demand for the greenback, in the meantime, stays underpinned by its safe have appeal, the status of ‘global reserve currency’, solid US fundamentals when compared to its G10 peers and the shift to a more accommodative stance from the rest of the central banks.

US Dollar Index relevant levels

At the moment, the pair is up 0.10% at 97.89 and faces the next resistance at 97.98 (monthly high Jul.26) seconded by 98.33 (monthly high Apr.23) and finally 98.37 (2019 high May 23). On the flip side, a breakdown of 96.67 (low Jul.18) would aim for 96.46 (low Jun.7) and then 96.04 (50% Fibo of the 2017-2018 drop).