US Dollar in the bottom of the range, still above 97.00

The greenback – tracked by the US Dollar Index (DXY) – is trading on a soft note at the beginning of the week, although it so far manages to keep business above the key 97.00 handle.

US Dollar focus on FOMC

The index continues to ease ground after last Friday’s tops in the mid-97.00s along with a softer momentum from yields in the US money markets. In fact, the 10-year reference is probing daily lows just above 2.21% ahead of the opening bell in Euroland, all amidst a tight range.

USD is expected to keep the cautious tone ahead of the FOMC meeting on Wednesday despite market participants have practically fully priced in a rate hike. In this regard, CME Group’s FedWatch toll places the probability of such scenario at 99.6% based on Fed Funds futures prices.

Prior surveys expect the Committee to lean towards the hawkish side, while the timing of the reduction of the Fed’s balance sheet and the ability of the Fed to achieve its 3 rate hikes projections for this year should be the next key theme for the buck.

On another direction, the speculative community has increased its net longs to 2-week peaks in the week to June 6, reverting a steady decline prevailing since mid-April, all as per the latest CFTC report.

In the US data space, nothing noteworthy today, while May’s producer prices expected tomorrow ahead of the key FOMC gathering on Wednesday.

US Dollar relevant levels

The index is losing 0.13% at 97.11 facing the next support at 96.45 (2017 low Jun.7) followed by 95.91 (low Nov.9 2016) and then 94.95 (low Sep.22 2016). On the upside, a break above 97.47 (high Jun.9) would open the door to 97.70 (high May 30) and finally 98.11 (50% Fibo of the May-June drop).