USD Index Futures On The Ropes, Beneath 95.000

It has been an active Monday morning on the markets. Although the U.S. indices have only posted modest gains, gold has broken out to the bull amid a USD sell-off. December USD Index future are down significantly, trading beneath the 95.000 handle. For the time being, risk-off seems to be the play as we get the forex week started.

Retail Sales

During the U.S. pre-market, the Retail Sales report for September hit the newswires. The metrics did not wow currency players, with the Greenback sliding after the official release. Here is a look at the report:

Event                                                                       Projected     Actual

Retail Sales (MoM, Sept.)                                           0.5%           0.1%

Retail Sales Except Autos (MoM, Sept.)                   0.3%          -0.1%

In the aggregate, these numbers are fairly disappointing. The U.S. FED continues to make a case for the coming negative impacts of a “sugar high” resulting from the current economic boom. Last week we saw stagnant year-over-year inflation by way of lagging CPI. Will today’s brutal Retail Sales numbers prompt Powell’s FED to reconsider a December rate hike?

Investors don’t think so. The CME FedWatch Index is assigning a 78% chance of rising rates being the result of December’s FED meeting. As of now, it is all systems go for gradual tightening.

December USD Index Futures

The daily chart for December USD Index futures shows a nice three-day consolidation pattern in the vicinity of 95.000. This formation is reminiscent of one we saw in early September.

Overview: At the moment, I maintain an intermediate-term bullish bias toward the USD index. It appears that the FED is committed to their plan of tightening regardless of what the current metrics say.

The 38% Current Wave Retracement (94.870) is setting up to be a key level of support in this market. In the event price continues the daily consolidation pattern in this area, the December USD Index may be in a position for a bullish break toward yearly highs.