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USD Index Under Pressure, Tests 97.500

The past two sessions have been active ones for the Greenback. Wide trading ranges and bearish sentiment have defined December USD Index futures, with rates currently hovering around 97.830. It appears as though today’s Retail Sales and UM Consumer Sentiment Index have given the dollar a much-needed lift.

Next week features the September 18th meeting of the U.S. FED and FOMC. The new dovish tone is expected to be extended, but may not be as strong as in July. In fact, the past month has brought a significant shift to the CME FEDWatch Index:

  • The odds of a ¼ point rate cut stand at 86.5%, down from 100% on August 13.
  • The odds of a ½ point rate cut stand at 0%, down from 3.8% on August 13.
  • There is now a 13.5% chance of rates being held static, up from 0% on August 13.

The driving force behind the shift in projections have been a collection of stronger than anticipated U.S. economic data releases. At least for the moment, the USD Index is finding some solid ground just beneath the 98.000 handle.

USD Index Experiences Heavy Volatility

Thursday’s session was a wild one for December USD Index futures. After a strong run at yearly highs, the Greenback stumbled before settling within the five-day value area near 98.000.

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

Here are two support levels to watch for the December USD Index for the remainder of the session:

  • Support(1): Daily SMA, 97.820
  • Support(2): Bollinger MP, 97.600

Overview: Today’s economic data is more evidence that another FED rate cut isn’t necessarily warranted. However, while the decision to cut will surely split the FOMC, chances are that rates are coming down by another ¼ point. 

For now, it is anyone’s guess how the USD Index will trade during FED week.

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Shain Vernier
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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