US Dollar Index rebounds from lows, still below 98.00

• DXY remains unable to gather serious traction.
• Yields of the US 10-year note come down from 1.180%.
• Philly Fed manufacturing gauge disappointed expectations.

The US Dollar Index (DXY), which tracks the buck vs. a bundle of its main competitors, remains under pressure in the 97.70/75 band so far.

US Dollar Index focused on more US data

The index remains under heavy pressure and is navigating its third consecutive session with losses.

Despite the strong bearish bias, the Greenback has managed to rebound from earlier new 2-month lows in the 97.50 region recorded in the wake of the Brexit deal.

In fact, the rally in the Sterling in past days on the back of rising optimism on a final agreement has been sustaining the improved sentiment in the riskier assets in detriment of the demand for the buck.

So far in the US docket, the Philly Fed manufacturing index came in at 5.6for the current month, missing consensus and lower than September’s 12.0. Further data saw Initial Claims at 214K WoW, Housing Starts dropping to 1.256M units (vs. 1.320M forecasted) and Building Permits at 1.387M units (vs. 1.340M expected).

Also weighing on USD, Industrial Production contracted 0.4% MoM in September and Manufacturing Production dropped 0.5% inter-month. In the same line, Capacity Utilization ticked lower to 77.5%.

What to look for around USD

DXY remains entrenched in the lower bound of the range in the mid-97.00s amidst rising scepticism on the US-China trade front and increased optimism in the riskier assets. In the meantime, investors’ attention has now shifted to the increasing likeliness of another insurance cut by the Fed at the October meeting amidst some loss of momentum in the US economy, particularly after recent figures from the manufacturing sector, mixed inflation results and some slowdown in consumer spending. On the broader view, the constructive outlook in DXY looks a bit damaged but it still is in play amidst a divided FOMC vs. a broad-based dovish stance from the rest of the G-10 central banks. In addition, the positive view on USD remains well sustained by its safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is losing 0.28% at 97.70 and faces the next support at 97.50 (monthly low Oct.17) seconded by 97.36 (200-day SMA) and then 97.17 (low Aug.23). On the upside, a breakout of 98.35 (55-day SMA) would open the door to 98.72 (21-day SMA) and finally 99.25 (high Oct.9).