US Dollar Index bounces off lows near 93.50 ahead of further data

• DXY stays on the defensive at the end of the week near 93.70.
• US Retail Sales surprised to the upside in September.
• Advanced Consumer Sentiment gauge closes the weekly docket.

The US Dollar Index (DXY), which measures the buck vs. a basket of its main rivals, remains on the defensive so far on Friday.

US Dollar Index looks to extra data

Despite the current corrective downside, the index is expected to close the week with gains and reverse the 2-week negative streak. So far, it seems the 93.00 neighbourhood has emerged as quite a solid contention area, whereas the 94.00 region looks a tough nut to crack for USD-bulls for the time being.

Meanwhile in the US, discussions over an extra stimulus package remain deadlocked at the time when investors have started to rule out any new development around this issue at least until the November elections have passed.

Focus, in the meantime, is expected to shift to the relentless advance of the second wave of the COVID-19 pandemic and its impacts on the already incipient economic recovery across the world.

In the US data space, Retail Sales expanded 1.9% MoM in September, more than initially estimated. Core sales followed suit and rose beyond forecasts by 1.5% MoM. Additional data saw Industrial Production unexpectedly contracting at a monthly 0.6% in September, while Manufacturing Production also came in on the soft side, shrinking 0.3% from a month earlier. Capacity Utilization also came in short of estimates, ticking lower to 71.5% during the same period.

Further data will include the advanced reading of the Consumer Sentiment for the current month as well as TIC Flows in August. Furthermore, NY Fed J.Williams (permanent voter, centrist) is also due to speak.

What to look for around USD

The index stays so far supported by the 93.000 area against the backdrop of alternating risk appetite trends. Occasional bullish attempts, however, are seen as temporary, as the underlying sentiment towards the greenback remains cautious-to-bearish. This view is reinforced by the “lower for longer” stance from the Federal Reserve, hopes of a strong recovery in the global economy, the negative position in the speculative community and rising bets of a “blue wave” win at the November elections. Developments around another US stimulus package also collaborate with the vigilant stance around the buck.

US Dollar Index relevant levels

At the moment, the index is losing 0.17% at 93.62 and faces immediate contention at 93.01 (monthly low Oct.12) followed by 92.70 (weekly low Sep.10) and then 91.92 (23.6% Fibo of the 2017-2018 drop). On the other hand, a break above 94.20 (38.2% Fibo retracement of the 2017-2018 drop) would aim for 94.74 (monthly high Sep.25) and finally 96.03 (50% Fibo of the 2017-2018 drop).