- T-bond yields lift the greenback in late NA session.
- Chicago Fed’s National Activity Index stays unchanged in August.
- Dallas Fed Manufacturing Index disappoints.
The US Dollar Index, which tracks the greenback against a basket of six major currencies, fell to a daily low of 93.84 in the early NA session amid the robust upsurges seen in the EUR/USD and the GBP/USD pairs but staged a modest recovery in the last couple of hours to retake the 94 handle. As of writing, the index was virtually unchanged on the day at 94.20.
Today’s Brexit headlines and ECB President Draghi’s hawkish monetary policy remarks allowed the pound sterling and the shared currency outperform their rivals. The data from the U.S. on Wednesday showed that the Chicago Fed’s National Activity Index stayed unchanged at 0.18 in August to surpass the analysts’ estimate of 0.02. “The contribution from production-related indicators to the CFNAI moved up to +0.16 in August from +0.10 in July while the employment-related indicators contributed -0.01, down from +0.13 in July,” Chicago Fed noted in its publication.
A separate report released by the Federal Reserve Bank of Dallas revealed that the business activity in the regional manufacturing sector expanded at a slower pace than expected with the headline general activity index easing to 28.1 from 30.9. Although the mixed data failed to lift the dollar, rising T-bond yields allowed the buck to find demand. At the moment, yields on both the 10 and 2-year references were up 0.5%.
This week’s FOMC meeting will be the next significant catalyst for the DXY. The monetary policy statement and the interest rate decision will be published on Wednesday following the 2-day meeting. “The FOMC will likely continue to forecast a total of four hikes in 2018, one more after the expected hike at the September meeting, three hikes in 2019 and one hike in 2020. However, the September Summary of Economic Projections (SEP) will be extended by one year, through 2021,” Nomura analysts noted in a recently published article.
Technical levels to consider
The immediate support for the index aligns at 94 (psychological level). A decisive break below this level could open the door for further losses toward 93.70 (Jul. 9 low) and 93.20 (Jun. 14 low). On the upside, resistances could be seen at 94.55 (Sep. 20 high), 95 (psychological level/50-DMA) and 95.60 (Aug. 9 high).
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