US Dollar headed for a weekly close below 93

Following a sharp drop to a fresh 16-day low at 92.59, the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, erased its daily losses and was last seen at 92.94, virtually unchanged on the day.

Today's macroeconomic data from the U.S. triggered a short-winded sell-off in the early NA session. Following a 0.2% increase in August, the core CPI rose 0.1% on a monthly basis in September and failed to meet the market estimate of 0.2%. On a yearly basis, the core CPI growth remained unchanged at 1.7. However, rising energy prices lifted the annual CPI to 2.2% from 1.9%. Other data showed that retail sales increased by 1.6% after contracting by 0.1% n August.

Although the initial reaction pushed the DXY lower, it didn't take long for the index to stage a recovery as the December rate hike expectations remained unchanged despite the disappointing inflation figures. According to the CME Group FedWatch Tool, the markets are pricing an 81.7% probability of a rate hike, unchanged from the previous day.

• Fed: on track for a December hike - Danske Bank

Moreover, the Consumer Sentiment Index released by the University of Michigan surged to its highest level in more than 13 years at 101.1 in October from 95.1 in September, fueling the index's rebound. 

Nevertheless, regardless of that late recovery, the index is on track to close the week lower for the first time since the first week of September. The FOMC September meeting minutes, which was released on Wednesday and caused the index to drop from mid-93s below the 93 mark, seems to have played a major role in this week's weak performance.

Technical outlook

The initial hurdle for the pair aligns at 93 (psychological level) followed by 94.10 (Oct. 6 high) and 95 (psychological level). On the downside, supports could be seen at 92.75 (50-DMA), 92 (psychological level) and 91.50 (Sep. 22 low).

Today's data from the U.S.

• US: Retail sales for Sep 2017 were $483.9 billion, an increase of 1.6% from the previous month
• US: CPI for all items increases 0.5% in September as gasoline index rises sharply
• US: Consumer sentiment surged in early October, highest level since start of 2004 - UoM