US Dollar softens with equities turning green

• The Greenback softens a touch on Tuesday against major peers amidst trade war tensions.
• Markets revalued the Greenback to the upside after upbeat Nonfarm Payrolls numbers and US yields rebounding. 
• The US Dollar Index trades back above 103.00 and looks to consolidate further. 

The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, trades above 103.20 at the time of writing on Tuesday, slightly lower in the day while risk on is trying to take over market sentiment. Over the past few days, the overall risk-off sentiment had rather devalued the Greenback substantially, though since the strong Nonfarm Payrolls (NFP) released on Friday, the DXY has been climbing back. The question will be if the index can hold on to this recovery when more US data comes in. 

On the economic calendar front, some light data is set to be published. The National Federation of Independent Business (NFIB) will release its Business Optimism Index for March. With the current tariffs narrative, markets will be sensitive to see how business sentiment is in the US, as this is often seen as a leading indicator. 

Daily digest market movers: Sentiment to watch 

• The NFIB Business Optimism Index for March is due. The actual number comes in at 97.4, missing the elevated estimate at 101.3 and below the previous reading at 100.7.
• At 17:00 GMT, a 3-Year Note Auction will be released in the US. 
• At 18:00 GMT, Federal Reserve Bank of San Francisco Mary C. Daly moderates a discussion with Brigitte C. Madrianm Dean of the Brigham Young University Marriott School of Business.
• A change from the red numbers this Tuesday, with both the Japanese Nikkei and Topix having closed off over 6% higher. Europe and the US face gains of over 1% across the board. 
• The CME FedWatch tool shows chances for an interest rate cut by the Fed in May standing at 28.6%, falling back from nearly 50% on Monday. For June, the chances of a rate cut are 94.5%, with a slim 5.5% chance for no rate cut at all.
• The US 10-year yields trade around 4.16%, bouncing off the five-month low at 3.85%. Considering this surge back above 4.00%, interest rate cut bets for the upcoming Fed meeting in May are being pared back. 

US Dollar Index Technical Analysis: Chopping around 

A parental disclosure for the US Dollar Index is in its place here. With the significant moves and pickup in volatility, the DXY could again fall or jump quite quickly. Traders will need to stick to known levels and trade what they see instead of trying to outsmart the market under these conditions.  

The first level to watch out for is 103.18, which needs to see a daily close above it.  Above there, the 104.00 round level and the 200-day Simple Moving Average (SMA) at 104.86 come into play. 

On the downside, 101.90 is the first line of defense, and it should be able to trigger a bounce as it has been able to hold the last two trading days. Maybe not on Tuesday, but in the coming days, a break below 101.90 could see a leg lower towards 100.00. 

US Dollar Index: Daily Chart