US Dollar Index has remained stable in the 103-area, despite a technical rejection.
The US Dollar (USD) is betting big on risk off on Monday, as tensions in the Middle East cause risk off in equity markets. With a flight to safe havens, yields are rising in favor of the US Dollar, causing traders to return and buy the US Dollar. This provides for an intriguing scenario in the future if the US Dollar Index (DXY) breaks back above a critical technical level. More strength ahead, according to the indication.
The economic calendar is light on Monday, but data will pile up throughout the week leading up to the main event on Friday: the US Jobs Report, or Nonfarm Payrolls. Expect moderate movements in cross rates against the US dollar, with most traders keeping their powder dry for Friday. This week will also see the release of job-related data such as JOLTS and ADP numbers.
US session begins with USD strength.
Several reports from Gaza indicate that Israeli tanks have been observed close outside Khan Younis.
After tightening throughout November, the difference between US and German bonds is widening once more.
The US Factory Orders figures for October are scheduled to be issued at 15:00 GMT. . Orders increased 2.8% in September, while markets anticipate a 2.6% fall in October.
The US Treasury will take advantage of the recent drop in US interest rates by issuing 3-month and 6-month bills.
In Asia, stocks are continuing to fall. The Hong Kong Hang Seng Index is the worst performer, losing more than 1%. European markets are slightly lower, but US futures are unchanged ahead of the start of the trading week.
According to the CME Group’s FedWatch Tool, markets are pricing in a 97.7% possibility that the Federal Reserve will hold interest rates steady at its meeting next week.
The 10-year US Treasury Note is trading at 4.27%, unchanged from this week’s low.
US Dollar Technical Analysis
The US Dollar is currently trading around 103.31 as measured by the DXY US Dollar Index. The US Dollar is trading around critical levels from a technical standpoint. Although the DXY was unable to break back above critical technical levels last week, it appears that a more significant catalyst is required to drive the DXY back above that critical 200-day Simple Moving Average (SMA) near 103.58, which is seen on a daily chart. With the US Jobs Report due out on Friday, the Greenback may be able to reclaim its title as King Dollar before the holidays.
The DXY is moving closer to the 200-day Simple Moving Average (SMA), which is currently at a high. near 103.58. If job data causes rising US yields to rise again, the DXY could still make it through there. A two-tiered pattern of a lower daily close followed by a higher opening would rapidly return the DXY above 104.28, with the 200-day and 100-day SMAs moved over to support levels.
On the downside, historic levels from August, when the Greenback’s summer rally occurred, are coming into play. The June lows are a good place to check for support, near 101.92, slightly below 102.00. If other events occur that cause further decreases in US rates, expect a near-complete unwind of the 2023 summer rally, with a target of 100.82, followed by 100.00 and 99.41.
