USD Index Price Analysis: No changes to the consolidative theme

DXY attempts a mild rebound after bottoming out near 111.80.

Further range bound remains on the cards for the time being.

DXY bounces off multi-session lows in the 111.80/75 band on Tuesday.

So far, the index looks poised to keep navigating within a 112.00-114.00 range at least until the next FOMC event.

The prospects for extra gains in the dollar should remain unchanged as long as the index trades above the 8-month support line near 108.00.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 103.43.

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US: Annual PPI declines to 8.5% in September vs. 8.4% expected

Annual PPI in the US declined modestly in September.

US Dollar Index stays in positive territory above 113.00 after the data.

The Producer Price Index (PPI) for final demand in the US declined to 8.5% on a yearly basis in September from 8.7% in August, the data published by the US Bureau of Labor Statistics revealed on Wednesday. This print came in slightly higher than the market expectation of 8.4%.

The annual Core PPI edged lower to 7.2% from 7.3%, compared to analysts' estimate of 7.3%. On a monthly basis, the Core PPI was up 0.3%, matching August's print. 

Market reaction

The US Dollar Index stretched higher with the initial reaction and was last seen rising 0.13% on the day at 113.43.

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USD Index rebounds from recent lows and retests 110.50 ahead of data\

The index reverses the recent pullback and advances to 110.50.

US yields attempt a mild recovery across the curve.

ADP Report, ISM Non-Manufacturing take centre stage in the docket.

The greenback regains the smile following the recent sharp decline and retakes the 110.50 region when gauged by the USD Index (DXY) on Wednesday.

USD Index now looks to data

The index picks up some pace and partially reverses two consecutive daily drops amidst some loss of momentum in the risk complex in light of the recent needle-like rebound, particularly in the euro and the British pound.

The recovery in the buck so far comes in tandem with a tepid bullish attempt in US yields across after two consecutive sessions closing with gains, especially in the short end and the belly of the curve.

Interesting calendar in the US later on Wednesday will see the usual weekly MBA Mortgage Applications due in the first turn seconded by the ADP Employment Change Report for the month of September, Balance of Trade results, final S&P Global Services PMI and the ISM Non-Manufacturing.

In addition, Atlanta Fed R.Bostic (2024 voter, hawk) is also due to speak.

What to look for around USD

A hint of a recovery seems to have emerged around the dollar midweek after some decent support appears to have turned up near the 110.00 neighbourhood.

While the near-term outlook for the dollar looks somewhat dented, the firmer conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market continues to prop up the underlying positive tone in the index.

Looking at the more macro scenario, the greenback also appears bolstered by the Fed’s divergence vs. most of its G10 peers in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: MBA Mortgage Applications, ADP Employment Change, Balance of Trade, Final Services PMI, ISM Non-Manufacturing (Wednesday) – Initial Jobless Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Consumer Credit Change, Wholesale Inventories (Friday).

Eminent issues on the back boiler: 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. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is gaining 0.28% at 110.51 and faces the next up barrier at 114.76 (2022 high September 28) seconded by 115.00 (round level) and then 115.32 (May 2002 high). On the other hand, a breach of 110.05 (weekly low October 4) would open the door to 109.35 (weekly low September 20) and finally 107.68 (monthly low September 13).

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Dow Futures Up 55 Pts; Core PCE Data in Focus

U.S. stocks are seen opening slightly higher Friday, rallying into the long weekend, helped by a reassessment of the Federal Reserve’s tightening bias as well as some strong retail sector earnings.

At 7 AM ET (1100 GMT), the Dow Futures contract was up 55 points, or 0.2%, S&P 500 Futures traded 14 points, or 0.3%, higher and Nasdaq 100 Futures climbed 70 points, or 0.6%.

The main equity indices on Wall Street posted strong gains Thursday, with the blue-chip Dow Jones Industrial Average closing over 500 points, or 1.6%, higher, while the broad-based S&P 500 gaining 2% and the tech-heavy Nasdaq Composite rising 2.7%.

These averages are on track to snap long losing streaks ahead of the Memorial Day holiday, with the Dow and S&P 500 both over 4% higher for the week and the Nasdaq Composite up 3.4% on the week.

Helping the better tone this week has been the take-away from the minutes of the last Federal Reserve meeting, which indicated that the central bank could slow down its tightening if it sees signs inflation is on a downward trend. 

This puts the spotlight on the release of the core personal consumption expenditure index, at 8:30 AM ET (1230 GMT), which is the Fed's preferred measure of inflationary trends. This is expected to fall to 4.9% on an annualized basis in April, from 5.2% the previous month.

A batch of strong earnings from the retail sector has also boosted market sentiment this week, with the likes of Macy’s (NYSE:M), Williams-Sonoma (NYSE:WSM), Dollar Tree (NASDAQ:DLTR) and Dollar General (NYSE:DG) all posting healthy gains.

Retail earnings continue Friday, with Big Lots (NYSE:BIG) due to report, but there will also be attention on Ulta Beauty (NASDAQ:ULTA), which reported better-than-expected quarterly results after the close Thursday, and Gap (NYSE:GPS), which slashed its full-year profit guidance. 

Workday (NASDAQ:WDAY) will also be in focus after missing earnings forecasts late on Thursday and giving disappointing guidance.

Oil prices edged lower Friday, consolidating around a two-month high on expected demand growth at the start of the summer driving season in the United States.

Also propping up the market is the continued expectation that the European Commission will eventually obtain the unanimous support of all 27 bloc member states for its proposed new sanctions against Russia, despite Hungary’s opposition to date.

By 7 AM ET, U.S. crude futures traded 0.4% lower at $113.67 a barrel, after gaining 3.4% during the previous session, while the Brent contract traded 0.4% lower at $113.70, after a gain of 2.7% on Thursday.

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