DXY inter-markets: looking to consolidate the upside

The US Dollar Index (DXY), which tracks the buck vs. its major competitors, is advancing for the second session in a row today although the upside momentum seems to lack of sustainability, faltering around 95.50/60 for the time being.

Market participants remain on a cautious mode so far today in light of Chief Yellen’s testimony before the House Panel and Fed speakers: Bullard, Evans and Mester. These events have regained relevance especially following the steady stance from the FOMC at its meeting last week and the prospects of a Fed’s rate hike in the next months.

Yields in US money markets are navigating a ‘sea of green’ across the curve, lending support to USD, while Fed Funds futures prices have retreated from daily highs. According to CME Group’s FedWatch tool, the probability of a rate hike by the Fed in December has receded to just above 44%, while it has dropped to near 8% for the month of November.

On the positioning front, DXY speculative net longs have dropped to the lowest level since July 12 during the week ended on September 20 (prior to the FOMC meeting), according to the latest CFTC report.

All in all, the index remains well underpinned by the support line off 2016 low seen in early May, today around 94.80, reinforced by September’s low in the mid-94.00s and ahead of August’s low near 94.00 the figure. In case of a resumption of the upside bias, the initial hurdle aligns around the 96.00 handle where sits the key 200-day sma, followed by a more relevant resistance area comprised of August/September ‘triple tops’ in the 96.30 region, reinforced by the retracement of the July-August drop at 96.26.