USD Index regains some balance and extends the bounce off 106.00

The index reverses three consecutive daily pullbacks.
The probability of a Fed’s rate hike loses traction.
Investors’ attention is expected to be on the US CPI.

Pablo Piovano FXStreet

The greenback reverses three daily drops in a row and regains the 106.30 region when tracked by the USD Index (DXY) at the beginning of the week.

USD looks at risk trends, inflation

The index leaves behind part of last week’s corrective decline and manages to pick up some buying interest on Monday.

In the meantime, the underlying bullish trend in the greenback remains well propped up by the equally robust march north in US yields across different time frames, which in turn looks underpinned by the persistent tighter-for-longer narrative around the Federal Reserve.

It is worth noting that the US bonds market will be closed on Monday due to the Columbus Day holiday.

On another front, the USD net longs climbed to levels last seen in mid-December 2022 during the week ended on October 3, according to the CFTC Positioning Report. During that period, the index rose to fresh 2023 tops past the 107.00 hurdle, always bolstered by speculation that the Fed might extend its restrictive stance for longer than anticipated.

There are no scheduled data releases on Monday, although markets’ attention will likely be on the speeches by Dallas Fed Lorie Logan (voter, hawk), FOMC Governor Michael Barr (permanent voter, centrist) and FOMC Governor Philip Jefferson (permanent voter, centrist).

What to look for around USD

The index attempts a rebound after briefly piercing the key 106.00 support at the end of last week.

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: NFIB Business Optimism Index, Wholesale Inventories (Tuesday) – MBA Mortgage Applications, Producer Prices, FOMC Minutes (Wednesday) - Initial Jobless Claims, Inflation Rate (Thursday) – Flash Consumer (Friday).

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.

USD Index relevant levels

Now, the index is up 0.21% at 106.32 and a breakout of 107.34 (2023 high October 3) would open the door to 107.99 (weekly high November 21 2022) and finally 110.99 (high November 10 2022). On the downside, the next support emerges at 105.65 (low September 29) ahead of 104.42 (weekly low September 11) and then 103.17 (200-day SMA).

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 bulls regain control above 0.6950 amid USD retreat

AUD/USD regains traction and extends the previous day's bounce from the weekly low, aiming for 0.7000 in Asia on Friday. The overnight pullback in US bond yields keeps the US Dollar below an 18-month high, which in turn offers some support to the pair. Meanwhile, hawkish RBA expectations also keep the major underpinned.

USD/JPY holds gains near 158.00 after Japan's weak Household Spending data

USD/JPY clings to gains around 158.00 after data showed on Friday that Japan's Household Spending fell for the ninth straight month, undermining the Japanese Yen. Meanwhile, the US Dollar remains depressed as the overnight fall in US bond yields counters a hawkish Fed and geopolitical uncertainties, could cap any downside in the pair.

Gold remains range-bound below $4,200

Gold has given up some ground after an initial bullish attempt to reach weekly highs, returning to below the $4,200 mark per troy ounce on Friday. The US Dollar’s strong upside momentum, combined with rising US Treasury yields across the curve, seems to keep further gains in the yellow metal under scrutiny.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?

The Euro is not the sick man of Europe. France's bond market is

EUR/USD remains under pressure, near the 17-month low of 1.1161 reached on Monday. The pair has lost more than 7% since its yearly peak, as concerns over France's public finances increasingly weigh on the single currency. But behind the weakness of the Euro (EUR), the problem does not necessarily lie with the European economy as a whole.