USD Index

USD Index Futures On The Ropes, Beneath 95.000

Posted Monday, October 15, 2018 by
Shain Vernier • 2 min read

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.

December USD Index Futures (DX), Daily Chart
December USD Index Futures (DX), Daily Chart

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.

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About the author

Shain Vernier is our US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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