US Dollar extends the drop to 98.50

The buck, in terms of the US Dollar Index, is extending its selling fashion for another session so far on Wednesday, currently testing lows in the mid-98.00s.

US Dollar capped around 99.00, US data eyed

After reaching fresh multi-month tops just above the 99.00 handle on Tuesday, the index has deflated to the current area of daily lows in the 98.55/50 band, as market participants seem to be cashing up part of recent strong gains.

However, the ongoing USD weakness is expected to be temporary, as expectations of a rate hike by the Federal Reserve at its meeting in December continue to rise and thus remain supportive of a stronger dollar.

Furthermore, CME Group’s FedWatch tool is now placing the probability of such an event at above 70% based on Fed Funds futures prices.

Adding to USD support, it is worth mentioning that the latest CFTC report showed the build up in USD speculative longs have taken net longs to the highest level since December 2015 during the week ended on October 18.

On the US data front, Services PMI gauged by Markit, New Home Sales, Goods Trade Balance and the weekly report on crude oil inventories by the DoE are all due later in the NA session.

US Dollar relevant levels

The index is losing 0.08% at 98.61 facing the immediate support at 97.47 (low Oct.12) followed by 97.35 (20-day sma) and finally 95.86 (200-day sma). On the other hand, a break above 99.09 (high Oct.25) would aim for 99.95 (high Jan.21) and then 100.60 (high Dec.3).