On Thursday, October 28, DXY found its direction below the 94 levels.
- On Thursday, DXY traded in a narrow range between 93.80 and.90.
- The US 10-year rates have dropped to below 1.55 percent, but 2-year yields have risen even further.
- The next event on the schedule is Flash Q3 GDP, followed by Weekly Claims.
DXY fundamental forecast
On Thursday, the greenback keeps the cautious note and hovers between 93.8 and 93.9 levels.
Focusing on data
Following Wednesday’s downtick, the index alternates gains and losses, always keeping an eye on the performance of US cash markets and broad risk appetite patterns.
Indeed, while yields at the front end of the curve continue to rise far beyond 0.50 percent — levels last seen in March 2020 — the belly of the curve is trading around 1.55 percent. Thus, the long end is trading well above 2.00 percent.
Support for greenback
Meanwhile, short-term US T-bond rates are rising, while the 10-year reference is falling, flattening the yield curve and strengthening the greenback.
Durable Goods Orders fell 0.4 percent in September, compared to a market projection of a 1.1 percent decrease. From $89.4 billion, the foreign trade imbalance grew to $96.3 billion. The US Dollar Index (DXY) closed little changed for the second day in a row below 94.00.
Democrats halt Biden’s plan
The White House and congressional Democrats hurry to finalize an agreement on their major domestic spending bill as President Joe Biden prepares to leave on Thursday for a week of talks in Europe.
If they succeed, House Speaker Nancy Pelosi intends to introduce a counterpart bipartisan infrastructure package to vote on the House floor before the president departs for Rome.
Key data releases from the US
On the calendar, ahead of Wall Street’s start, investors will examine advanced third-quarter US economic growth numbers for hints on the rate of recovery in the world’s largest economy following a jump in Covid-19 infections.
What’s next?
The index loses some ground due to the lack of follow-through following the recent breakthrough of the 94.00 barriers. However, the favorable performance of US rates and encouraging Fed statements about the commencement of the tapering process as early as November or December suggest that the tapering process will begin soon, bolstered by the latest comments by Chief Powell.
Furthermore, the increased likelihood that high inflation will persist for longer is one of the fundamental drivers of the dollar’s positive outlook in the near-to-medium term.
DXY technical analysis: key levels in action
DXY is above the 100-day moving average on the daily chart, and the MACD is currently trading at its neutral level.
Now, the index is losing 0.02% at 93.91. A break above 94.17 would open the door to 94.56, the level it achieved on October 12. If it can cross that level, we’ll see the index touching 94.74. It was high on September 25, 2020.
On the flip side, the next support for the index lies around 93.48, followed by 93.32, and finally, 92.98, which was its September 23 low.
