DXY inter-markets: waiting for the Fed

The US Dollar Index (DXY) – which tracks the buck vs. a basket of its main rivals – has reverted a negative start today and is recovering part of Monday’s strong pullback early in the European afternoon, looking to retake the critical 96.00 barrier after bottoming out near 95.50.

Yields in the German money markets are trading on the defensive today vs. a mixed performance from their US peers, leaving the spread differential favouring the greenback for the time being and accompanying the recovery in USD. at the same time.

Volatility gauged by VIX is meandering recent lows, while Fed Funds futures prices have retreated from tops, although they remain in the upper end of the recent range. In view of CME Group’s FedWatch tool, the probability of a Fed’s rate hike at tomorrow’s meeting remains at 12% and has climbed above 45% when comes to potential higher rates in December.

That said, DXY faces interim resistance in the 96.08/30 band, where sit the 200-days sma, recent ‘double tops’ (Aug.31/Sep.1) and the 38.2% Fibo retracement of the July-August drop. On the downside, the index remains well underpinned by the +4-month support line off 2016 low (May 3), today at 94.71.