US Dollar retraces daily losses to turn flat around 93.80

The US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, plummetted to a fresh 13-month low at 93.50 just before the NA session went under way but was able to find support there. After retracing its losses in the last hour, the index is now at 93.80, virtually unchanged on the day.

There were no clear catalysts behind the sudden fall witnessed earlier in the day, and the index didn't have a difficult time to start a recovery move. The robust performance of the U.S. Treasury-bond yields with the 10-year reference gaining nearly 3% on the day is giving a hand to the greenback. Furthermore, today's data from the Conference Board showed that despite the ongoing political drama in the U.S., the consumer confidence continued to improve in July as it came in at 121.1 to beat the market consensus of 116.5.

• US: Consumer confidence increased in July following a marginal decline in June - Conference Board
• US: Home prices continue to climb and outpace both inflation and wages - S&P/Case-Shiller

In the meantime, the Senate will vote on the House healthcare bill later today, and the latest reports show that markets are relatively optimistic that this time the Trump administration could finally succeed and move on to the more critical policy changes such as the tax reform and the infrastructure overhaul.

The next significant catalyst for the greenback will be the FOMC meeting tomorrow. Although there won't be a press conference nor a forecast report tomorrow, investors look for clues regarding the timing of the start of the balance sheet reduction.

Valeria Bednarik, Chief Analyst at FXStreet, writes, "dollar's broad weakness will likely persist and will likely happen something similar to what happened with the ECB last week: the market will only listen what it wants to hear. The most likely scenario is that the market will disregard confident comments on inflation, and take the thinnest negative line to sell back the greenback, as it took Draghi's forced statement that policy makers will discuss their monetary policy next fall, to buy the common currency."

• FOMC Preview: Three is a mirage - Rabobank
• Fed to stay relatively upbeat this week - ING

Technical outlook

The index might need to make a decisive break above the 94 handle to extend its correction towards 95 (psychological level/Jul. 20 high) and 95.60 (Jul. 14 high). On the downside, near-term supports align at 93.55/50 (Jun. 20, 2016, low/daily low), 93 (psychological level/Jun. 23, 2016, low) and 92.50 (May 2, 2016, low).