The USD Index (DXY), which tracks the greenback vs. a bundle of its main competitors, keeps the downtrend well in place and threatens to revisit the 103.00 region on turnaround Tuesday.
The selling pressure around the index accelerates its pace and gradually approaches the key 103.00 neighbourhood on Tuesday. Furthermore, the downside bias in the dollar seems to have gathered extra pace following the recent breach of the key 200-day SMA (103.61).
In addition, the dollar’s negative price action so far comes in tandem with the small retracement in US yields across different timeframes, always against the backdrop of rising speculation that the Federal Reserve might start reducing its interest rate as soon as in the spring of 2024.
On the US calendar, markets’ attention is expected to be on the publication of the FOMC Minutes of the November meeting seconded by Existing Home Sales and the Chicago Fed National Activity Index.
In the meantime, the downward bias maintains its dominance on the greenback and forces the index to shift its focus to the 103.00 support in the short term.
Furthermore, the dollar appears depressed against the backdrop of rising speculation of probable interest rate cuts in H1 2024, all in response to further disinflationary pressures and the gradual cooling of the labour market.
Some support for the greenback, however, still emerges the resilience of the US economy as well as a hawkish narrative from some Fed rate setters.
Key events in the US this week: Chicago Fed National Activity Index, Existing Home Sales, FOMC Minutes Tuesday) – MBA Mortgage Applications, Durable Goods Orders, Initial Jobless Claims, Final Michigan Consumer Sentiment (Wednesday) – S&P Global Flash Manufacturing/ Services PMIs (Friday).
Now, the index is down 0.19% at 103.25 and faces immediate contention at 103.00 (round level) ahead of 102.93 (weekly low August 30) and then the psychological 100.00 threshold. On the upside, the breakout of 104.19 (100-day SMAZ) could expose a move to 106.00 (weekly high November 10) and finally 106.88 (weekly high October 26).
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