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03.11.2021 16:51

US Dollar Index looks offered around 94.00, looks to FOMC

  • DXY trades with marginal losses around the 94.00 region.
  • The Fed is likely to announce the start of the QE tapering.
  • US ADP report will take centre stage later in the session.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, sheds some ground although it manages well to keep business abobe the 94.00 mark on Wednesday.

US Dollar Index focuses on the FOMC event

The index extends the erratic performance so far this week and keeps navigating the upper end of the weekly range around the 94.00 neighbourhood, all amidst thin trading condition ahead of the FOMC gathering due later in the European evening.

In the meantime, the continuation of the downtrend in US yields across the curve seems to be weighing on the dollar’s performance, with the front end hovering around 0.45%, the belly near 1.52% and the long end flirting with multi-week lows around 1.93%.

The cautious note in the buck comes as market participants expect the Federal Reserve to announce the start of the tapering of its $120B stimulus programme as soon as in November and at a likely $15B monthly pace.

Other than the FOMC meeting, the weekly MBA Mortgage Applications are due seconded by the ADP report, Factory Orders and the ISM Non-Manufacturing.

What to look for around USD

The index managed to regain the 94.00 barrier and now looks to keep business above it ahead of the FOMC event. The upcoming Fed gathering plus Friday’s Nonfarm Payrolls are seen dictating the price action around the buck for the time being. In addition, the greenback should continue to closely track the performance of US yields and the progress of the current elevated inflation as well as views from Fed’s rate-setters regarding the probability that high prices could linger for longer, all along the performance of the economic recovery against the backdrop of unabated supply disruptions and the equally incessant raise in coronavirus cases.

Key events in the US this week: Factory Orders, ISM Non-Manufacturing, ADP Report, FOMC meeting (Wednesday) – Balance of Trade, Initial Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate (Friday).

Eminent issues on the back boiler: Discussions around Biden’s multi-billion Build Back Better plan. US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. Debt ceiling debate. Geopolitical risks stemming from Afghanistan.

US Dollar Index relevant levels

Now, the index is losing 0.06% at 94.04 and a break above 94.30 (weekly high Oct.29) would open the door to 94.56 (2021 high Oct.12) and then 94.74 (monthly high Sep.24 2020). On the flip side, the next down barrier emerges at 93.27 (monthly low October 28) followed by 92.98 (weekly low Sep.23) and finally 92.96 (100-day SMA).


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