Forex world

November 17, 2022

USD Index pokes with weekly highs around 107.00

- The index extends the rebound past the 107.00 barrier.

- Higher US yields also prop up the uptick in the dollar.

- The Philly Fed index worsened to -19.4 for the current month.

The greenback regains poise and advances to the area above the 107.00 barrier, near weekly tops, when measured by the USD Index (DXY) on Thursday.

USD Index: Upside bolstered by higher yields

The index attracts renewed buying interest and advances to multi-day peaks north of the 107.00 hurdle following a soft tone in the risk-linked galaxy, while extra help also comes from the US debt market.

On the latter, yields across the curve seem to have woken up and manage to leave behind several sessions in the red – especially in the belly and the long end of the curve, all against the backdrop of somewhat consolidated speculation of a Fed’s pivot in its monetary policy.

In the US docket, Initial Jobless Claims rose by 222K in the week to November 12, Housing Starts contracted 4.2% MoM in October, or 1.425M units, and flash Building Permits contracted 2.4% from a month earlier, or 1.526M units.

Additionally, the always relevant Philly Fed Manufacturing Index deteriorated to -19.4 for the current month.

What to look for around USD

The index regained upside momentum and trespasses the key 107.00 barrier on Thursday.

In the meantime, the greenback is expected to remain under the microscope amidst persistent investors’ repricing of a probable slower pace of the Fed’s rate path in the upcoming months.

Key events in the US this week: Building Permits, Initial Jobless Claims, Housing Starts, Philly Fed Index (Thursday) - CB Leading Index, Existing Home Sales (Friday).

Eminent issues on the back boiler: US midterm elections. Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is gaining 0.63% at 106.95 and faces the next resistance at 109.13 (100-day SMA) seconded by 110.81 (55-day SMA) and then 113.14 (monthly high November 3). On the other hand, the breakdown of 105.34 (monthly low November 15) would open the door to 105.00 (200-day SMA) and finally 104.63 (monthly low August 10).

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