The US Dollar Index – which tracks the buck vs. its main rivals – is struggling for direction at the beginning of the week, although it so far manages to keep the trade around the 98.00 neighbourhood, or 7-month tops.
Yields in US money markets have retreated from recent multi-week highs, albeit the 10-year benchmark still gyrates around highs near 1.80%, levels last seen in June. Collaborating with the USD rally, Fed Funds futures prices are navigating daily highs, with the CME Group’s FedWatch tool now signalling the probability of a rate hike by the Fed in December at 64%.
In the US data space and while market participants continue to digest Friday’s Retail Sales figures, the NY Empire State index, Industrial Production and Capacity Utilization are all due later along with the speech by FOMC’s S.Fischer. Results from the US calendar have come to the fore once again after the FOMC minutes have reinforced the ‘data-dependent’ stance from the Committee last week.
Regarding FX, DXY seems poised for some consolidation at current levels ahead of a potential resumption of the leg higher, facing the next relevant resistance around 98.60, March tops. Once cleared, there are no significant hurdles until a challenge of the ‘triple tops’ just below the critical 100.00 limestone seen at the beginning of the year. Furthermore, the constructive view around DXY appears sustained by the support line off 2016 lows, today in the 95.30 area.