US Dollar extends losses below 99 on poor NY Fed data

After breaking below the 99 handle, the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, continued to push lower at the American opening and refreshed its session low at 98.68. At the moment, the index is at 98.70, losing 0.36% on the day.

Although the index started the week in a calm manner and stayed in a narrow above the 99 mark, the negative effect of last week's dismal inflation numbers from the United States on the greenback started to weigh as the expectations of a rate hike in June continued to weaken. The CME Group FedWatch Tool, which last week showed an 83% chance of a rate hike, is now suggesting a probability of 69.2%. In addition to disappointing data, last week's Fed speakers' cautious tone contributes to the general USD weakness as well.

• Fed's monetary policy - Nomura

Moreover, the Federal Reserve Bank of New York announced its Empire State Manufacturing Survey. The headline general business condition index dropped to -1 in May from 5.2 in April, missing the consensus of 7 and suggesting that the economic activity continues to lose momentum in the second quarter of the year. The remainder of the session will be rather quiet in terms of data releases and the DXY could find it difficult to break away from the bearish pressure.

• US: The headline general business conditions index fell six points to -1.0 - NY Fed

Technical outlook

The index could encounter the first technical support at 98.35 (May 8 low) ahead of 98 (psychological level) and 97.60 (Nov. 1 low). To the upside, resistances could be seen at 99 (psychological level), 99.60 (May 12 high) and 100 (psychological level).