DXY inter-markets: temporary dip?

The greenback, gauged by the US Dollar Index, is prolonging its leg lower after post-Brexit peaks in the vicinity of the 97.00 handle. Today’s breakdown of the key support at 96.00 and subsequent multi-day lows around 95.70 has been accompanied by a persistent pick up in the risk-on sentiment as markets across the board keep trimming recent losses.

Expectations of a rate hike by the Federal Reserve have been drastically trimmed as of late, with markets now seeing the probability of a rate hike at the December meeting at levels under 20%, same as February 2017, according to CME Group’s FedWatch tool.

Improvement in the risk-associated space remains reflected by the VIX – which tracks volatility – returning to lows pre-UK referendum.

Performance from US yields are mixed so far, removing momentum from the US dollar while markets keep assessing the potential extent of the current risk-rebound.

Ahead in the week, Brexit events will remain the key factor behind global sentiment, while the index faces initial support at the 100-day sma at 95.24 ahead of the uptrend line from 2016 lows at 93.20 and then post-Brexit lows in the 93.00  neighbourhood. On the upside, Monday’s top at 96.86 emerges as the initial hurdle ahead of March lows at 98.59.