USD Index remains under pressure, bounces off lows near 105.30

• The index seems to have met some initial contention near 105.30.
• US yields keep navigating in the negative territory on Tuesday.
• US Producer Prices rose less than expected in October.

The USD Index (DXY), which tracks the greenback vs. a basket of its main rivals, resumes the intense leg lower and retests the 105.30 region on Tuesday.

USD Index rebounds from 3-month lows

The index rapidly sets aside Monday’s bullish attempt and resumes the downtrend on turnaround Tuesday, briefly revisiting the 105.30 region for the first time since mid-August just to pick up some pace afterwards.

Also collaborating with the decline in the dollar comes another negative session in US yields across the curve, amidst unabated repricing of a Fed’s pivot in its policy.

Extra pessimism in the dollar came after US Producer Prices rose less than expected 0.2% MoM in October and 8% over the last twelve months, supporting the view that inflation has lost some traction as of late.

Additional results saw the NY Empire State Manufacturing Index improve to 4.5 in November (from -9.1).

What to look for around USD

The index remains under heavy pressure, always stemming from the probability of a slower rate path in the next months by the Fed and its positive impact on the risk-associated universe.

In the meantime, investors’ repricing of a probable pivot in the Fed’s policy now emerges as a fresh and quite reliable source of weakness for the dollar, in line with a corrective decline in US yields across the curve.

Key events in the US this week: Producer Prices (Tuesday) – MBA Mortgage Applications, Retail Sales, Industrial Production, Business Inventories, NAHB Index, TIC Flows (Wednesday) – 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 retreating 0.82% at 106.06 and the breakdown of 105.34 (monthly low November 15) would open the door to 104.89 (200-day SMA) and finally 104.63 (monthly low August 10). On the other hand, the next up barrier aligns at 109.10 (100-day SMA) seconded by 110.91 (55-day SMA) and then 113.14 (monthly high November 3).