The US Dollar Index (DXY) is a measure of the dollar’s performance against a range of significant competitors, rapidly slowed down and then reached 109.00 and hit fresh lows for the week on Thursday.
The US dollar index is (much) less sluggish than the CPI
Selling pressures for the dollar increased following US inflation figures swung to the negative in October, with inflation rising 7.7 percentage points m/m for 2021 and 0.4 percent per month. Furthermore, prices, excluding energy and food costs which is the base CPI were also below estimates and climbed 6.3 percent over the last twelve months.
US dollar sellers swiftly went back to trading following lower-than-expected CPI numbers sparked speculation of the possibility of a change in the Fed’s position in the near term. In contrast, the index sank to levels last seen in mid-September, around 108.70, with further losses for US prices across the spectrum.
Other data from the economic docket showed the initial unemployment claims increased by 225K during the week that ended on Nov 5.
In the next session, the budget statement for October will be due to be released, as are speeches that are unrelated to the US CPI release. The US economic calendar also includes the typical first jobless claim, the monthly budget statement, and addresses from Harker of the Federal Reserve in Philadelphia (vote 2023 and Hawk), Dallas Fed Logan (voter 2023 and in the center), Cleveland Fed Meister (voter, the Hawk) as well as George, Kansas City Fed (voter and Hawk).
Factors that impact the US dollar
The bearish mood of the dollar has renewed following the release of disappointing inflation numbers in the US, which is in line with the increasing concerns that the Fed’s normalization of policy is likely to slow in the near term.
At the moment, the repricing by investors of possible Fed policy changes is becoming a new and reliable cause of weakness in the dollar, in keeping with the decline in corrective rates of US bonds’ yields over the spectrum.
The actual US events for this week are the inflation rate, Initial jobless claims, the Monthly Budget Report (Thursday) (Thursday) Michigan preliminary consumer confidence (Fri).
Notable Background Issues: The US Midterm Elections. Falling (stiff/smooth/weak?) US economy. The chances are in favor of the Federal Reserve raising interest rates against the possibility of a recession coming in the next few months. A shift in the Fed’s policy. Political outbursts in the geopolitical arena towards Russia as well as China. The ongoing trade dispute between China and the United States and China.
The related dollar index levels
The index is trading down 1.61 percent to 108.67, and a break down at 108.62 (monthly low on Nov 10) can open the door for 107.68 (monthly low of Sep 13) and then 104.73 (200 daily SMA). However, the next upside resistance is 113.14 (monthly high on Nov 3), then 113.88 (monthly peak Oct 13), and 114.76 (2022 high on Sep 28).
