USD Index breaks below 107.00 as bears push harder

The selling pressure gathers further steam and drags the dollar to new 3-month lows in the 106.70 region when gauged by the USD Index (DXY) at the end of the week.

USD Index melts, as risk-on trade surges

The sentiment around the dollar continues to deteriorate on Friday, forcing the index to slip back to levels last traded in mid-August near 106.70. The DXY has already lost nearly 4% since Thursday’s tops near the 111.00 neighbourhood to the current area of multi-week lows.

The increasing appetite for the risk complex keeps propping up the intense selling bias in the dollar in line with rising speculation that the Federal Reserve could slow the pace of its future interest rate hikes. A decision on the latter could very well be on the table at the FOMC’s event in December.

In the data space, the only release of note will be the preliminary Michigan Consumer Sentiment for the month of November.

What to look for around USD

The index extends the sharp decline in the aftermath of US inflation figures and against the backdrop of a firmer sentiment in the risk-linked galaxy.

In the meantime, investors’ repricing of a probable pivot in the Fed’s policy now emerges as a fresh and quite reliable source of weakness for the dollar, in line with a corrective decline in US yields across the curve.

Key events in the US this week: Preliminary Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: US midterm elections. Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is retreating 1.06% at 106.78 and the breakdown of 104.78 (200-day SMA) would open the door to 104.63 (monthly low August 10) and finally 103.67 (weekly low June 27). On the other hand, the next up barrier aligns at 109.06 (100-day SMA) seconded by 110.99 (55-day SMA) and then 113.14 (monthly high November 3).