Despite today’s short-term bearish pressure, September USD Index futures are putting in a strong September. In fact, rates have broken above daily resistance, north of 93.200. With next Wednesday being FOMC day, currency traders are managing their exposure to the Greenback very carefully.

As it has since the COVID-19 market crash of last March, the CME FEDwatch Index shows a 0% chance of a FED rate hike until at least March 2021. So, what is prompting investors to buy the dollar? Given the FED’s commitments to long-term QE and inflation, why would anyone run to the USD?

The answers to those questions are elusive, at best. However, one possible explanation is that the markets are expecting the FED to slow open market operations by the end of the year. Today brought a month-over-month gain of $6 billion in U.S. 10-year note sales. This is a key data point, and one that tells us the U.S. Treasury is issuing an unprecedented amount of debt. And, much of this debt is being snapped up by the FED. Given the dramatic pace, perhaps Jerome Powell will elude to tapering-off open market operations sometime in the near future.

Either way, USD Index futures have broken into daily bullish territory. Let’s dig into the technicals and see what this market has to offer.

September USD Index Futures Above Daily Resistance

As we roll into the fall, September USD Index futures are trading within the bottom third of 2020’s range. Currently, an intermediate-term bearish bias is warranted. Until the 38% Retracement of June/September’s range (94.050) is taken out, the summertime downtrend remains valid.

For the near future, there is one key level worth watching in this market:

• Resistance(1): 38% June/September Selloff, 94.050

Overview: Even though it’s been a strong September for the USD Index, the Greenback has still been crushed in 2020. Rates were above 97.000 in February before the COVID-19 crash; now, they sit at 93.250. Unless we see a major shift in FED policy, values will remain depressed for the near future. Either way, the picture is to come a bit clearer following next week’s FOMC Meeting.