USD Index comes under pressure near 106.50, looks at Fedspeak

The index faces some selling pressure near 106.50.
US Monthly Budget Statement, Empire State index next on tap.
Fed’s P. Harker is due to speak later in the NA session.

Pablo Piovano FXStreet

The greenback, in terms of the USD Index (DXY), comes under some modest downside pressure following Friday’s weekly highs near the 106.80 level on Monday.

USD Index looks at risk trends, Fedspeak

The index gives away part of the recent two-day recovery to the vicinity of 106.80 on the back of a so far decent rebound in the risk-linked galaxy at the beginning of the week.

Despite the index reclaimed part of the ground lost since the beginning of the month during the latter part of last week, the dollar has been losing momentum in tandem with the renewed dovish tone from Fed speakers. In addition, despite the assumption that the Federal Reserve's tighter-for-longer policy remains in place for the time being, the possibility of another rate rise before the end of the year appears to have reduced recently.

Furthermore, escalating geopolitical concerns stemming from the Middle East and its associated pick-up in the risk aversion continue to be a source of potential strength for the dollar.

Later in the NA session, the NY Empire State Index is due seconded by Monthly Budget Statement and the speech by Philly Fed Patrick Harker (voter, hawk).

What to look for around USD

The price action around the index remains depressed and in the area of monthly lows around 105.70 ahead of the release of key data in the US calendar on Wednesday.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which at the same time appears underpinned by the renewed tighter-for-longer stance narrative from the Federal Reserve.

Key events in the US this week: NY Empire State Manufacturing Index (Monday) - Retail Sales, Industrial Production, NAHB Index, Business Inventories (Tuesday) – MBA Mortgage Applications, Building Permits, Housing Starts, Fed Beige Book, TIC Flows (Wednesday) - Initial Jobless Claims, Philly Fed Manufacturing Index, CB Leading Index, Existing Home Sales, Fed Powell (Thursday).

Eminent issues on the back boiler: Persevering debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China and the Middle East.

USD Index relevant levels

Now, the index is losing 0.20% at 106.46 and faces the next support at 105.53 (monthly low October 12) ahead of 104.42 (weekly low September 11) and then 103.22 (200-day SMA). On the other hand, a breakout of 106.78 (weekly peak October 13) could expose 107.34 (2023 high October 3) and finally 107.99 (weekly high November 21 2022).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

AUD/USD consolidates above 0.7200 after hot Chinese CPI data

AUD/USD is extending its consolidative price action above 0.7200 during the Asian session on Wednesday, uninspired by hot Chinese CPI and PPI data. Meanwhile, rising RBA rate-hike bets act as a tailwind for the Aussie amid Yen-inspired US Dollar weakness. Traders await the release of US inflation figures later in the week for fresh impetus.

USD/JPY stays in red near 153.50 amid aggressive BoJ hike bets

USD/JPY keeps the bearish tone intact at around 153.50 during European trading hours on Wednesday. A strong Reuters Tankan business survey adds to the case for continued BoJ policy normalisation and supports the Japanese Yen. This, along with a broadly weaker US Dollar, keeps the pair close to a nearly seven-month low set on Tuesday.

Gold recovers further from one-week low, retakes $4.400 amid sustained USD selling

Gold builds on its intraday recovery from a one-week low and reclaims the $4,400 mark heading into the European session on Wednesday. The commodity, for now, seems to have snapped a three-day losing streak amid a weaker US Dollar, which remains depressed near its lowest level in over two weeks amid the Bank of Japan-inspired rally in the Japanese Yen.

Pi Network's rebound holds as momentum improves

Pi Network (PI) extends its recovery on Wednesday, trading above $0.098 after finding support around the 50-day Exponential Moving Average earlier this week. The rebound comes as the Pi Core Team highlights the importance of strengthening its developer ecosystem to expand application-level utility across the network.

Oil, Apple and JPY in focus

Oil prices are rising on Wednesday as tit-for-tat strikes between Iran and the US threaten oil supplies as the two sides battle for control of the Strait of Hormuz. Stock futures have switched their attention from a strong earnings season to the challenges ahead, including a 10-year Treasury yield that is hovering close to the 4.8% level.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.