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US Dollar Index rebound looks to regain 112.00 amid volatile markets, US PMIs, GDP in focus

  • US Dollar Index recovers from a two-week low, pares the first weekly loss in three.
  • Challenges to sentiment and alleged intervention from Japan triggered the recent run-up.
  • Receding hawkish Fed bets, cautious mood ahead of the critical data challenge buyers.
  • S&P Global PMIs for October will decorate today’s calendar, but the first readings of US GDP will be crucial.

US Dollar Index (DXY) begins the week on firmer footing after witnessing the first weekly loss in three, as buyers approach 112.00 during Monday’s Asian session. In doing so, the greenback’s gauge versus the six major currencies bounced off the lowest levels in two weeks, marked earlier in the day.

Chatters surrounding Japan’s meddling in the market to defend the yen appeared to have triggered the DXY’s latest rebound. Even so, Japan’s top currency diplomat, Masato Kanda and Finance Minister Shunichi Suzuki resist confirming the intervention, as they did in the past, during their latest communications.

Elsewhere, the news that Both North and South Korea have exchanged warning shots near their disputed western sea boundary, published on Monday, also seemed to have favored the US dollar buyers of late. On the same line could be the fears that China President Xi Jinping won’t hesitate to escalate geopolitical matters with the US when it comes to Taiwan. The reason could be linked to Jinping’s dominating performance at the annual Communist Party Congress after winning the third term in a row.

That said, the DXY dropped heavily on Friday while amplifying the first weekly negative in three as the hawkish Fed bets retreated after mixed Fedspeak. St. Louis Fed President James Bullard said, “I want rates that put significant downward pressure on inflation.” On the same line, Chicago Fed President Charles Evans stated that they would need to raise rates further and hold them for a while. However, Nick Timiraos, Chief Economics Correspondent at The Wall Street Journal (WSJ), wrote that the Federal Reserve officials are barreling toward another interest-rate rise of 75 bps at their meeting in November and are likely to debate then whether and how to signal plans to approve a minor increase in December.

Amid these plays, the US equities posted the most significant weekly gains in four months, while the US 10-year Treasury yield marked a 5% weekly gain while refreshing a 14-year high, despite posting mild losses on Friday. Also, the CME’s FedWatch Tool suggested a nearly 88% chance of the Fed’s 75 bps rate hike in November after posting almost 95% odds for the outcome earlier in the week.

The Fed policymakers’ two-week silence ahead of November’s Federal Open Market Committee (FOMC) meeting may restrict the DXY’s immediate moves. However, the preliminary readings for the US PMIs for October and the first readings of the US Gross Domestic Product for the third quarter (Q3), up for publishing on Monday and Thursday, respectively, could entertain the pair traders.

Technical analysis

Despite bouncing off an upward-sloping support line from August 11, around 111.60 by the press time, the US Dollar Index (DXY) needs to provide a daily closing beyond the six-week-old previous support, close to 112.05, to convince buyers.

Additional important levels

Overview
Today last price111.85
Today Daily Change-0.05
Today Daily Change %-0.04%
Today daily open111.9
 
Trends
Daily SMA20112.52
Daily SMA50110.69
Daily SMA100108.22
Daily SMA200103.8
 
Levels
Previous Daily High113.95
Previous Daily Low111.7
Previous Weekly High113.95
Previous Weekly Low111.7
Previous Monthly High114.78
Previous Monthly Low107.67
Daily Fibonacci 38.2%112.56
Daily Fibonacci 61.8%113.09
Daily Pivot Point S1111.08
Daily Pivot Point S2110.26
Daily Pivot Point S3108.83
Daily Pivot Point R1113.33
Daily Pivot Point R2114.77
Daily Pivot Point R3115.58

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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