The US Dollar held steady on Monday, maintaining its position near last week’s high as traders prepare for key events later in the week. While tensions in the Middle East persist, market attention is focused on the upcoming Federal Reserve (Fed) Minutes and the September Consumer Price Index (CPI) report, both of which are likely to shape expectations for the next Fed rate decision. The US Dollar Index (DXY), which measures the dollar against six major currencies, is hovering around 102.50, with traders debating whether it will push towards 103.00.
Although Monday’s economic calendar is light, the release of August’s Consumer Credit Change is on the schedule, with expectations for a significant drop from $25.45 billion in July to $12 billion. However, all eyes will be on Thursday’s CPI data, which will be the main driver for the US Dollar this week. Investors are still trying to gauge whether the US economy is heading for a soft landing, a “Goldilocks” scenario, or veering towards a recession.
Adding to the mix, four Fed officials are set to speak on Monday, providing further clues ahead of November’s rate decision. Fed Governor Michelle Bowman, Minneapolis Fed President Neel Kashkari, Atlanta Fed President Raphael Bostic, and St. Louis Fed President Alberto Musalem are all slated for appearances throughout the day, discussing topics ranging from banking regulation to the broader US economy.
On the global front, the Biden administration has not yet given Israel the go-ahead to attack Iranian oil fields in response to ongoing tensions. While there wasn’t a firm “no,” President Biden mentioned on Friday that alternative options are being considered.
In the markets, European equities struggled, with indices in the red, while US futures also pointed to further losses, down about 0.5% on average. The CME Fed-Watch Tool indicates a 93.1% likelihood of a 25 basis point rate cut at the November 7 Fed meeting, with a 6.9% chance of no rate cut. Any chance of a 50 basis point cut has been completely priced out.
In terms of bond markets, the US 10-year Treasury yield touched a 30-day high at 3.99% and is flirting with breaking above the key 4.00% level.
Technical Outlook :
The DXY has surged upward with remarkable speed, almost reminiscent of a sprint by Usain Bolt. With the market now ruling out a 50 basis point cut, and more people betting that no rate cut might happen, the rapid climb in the dollar could pause soon. The first big challenge for the DXY will be to break through the psychological level of 103.00. If it clears that, the next resistance comes in at 103.18, followed by a choppy range with key levels between 103.34 (100-day Simple Moving Average) and 104.00.
On the downside, support lies at the 55-day Simple Moving Average of 102.03, followed by the 102.00 level. If the DXY dips below 101.90, it could trigger more selling pressure, with the next major support at 100.62 and the year-to-date low of 100.16. Should the index drop below 100.00, the July 14, 2023 low at 99.58 would be the next level to watch.
