US Dollar erases Monday’s off day with an early rally

• The US Dollar flips 180 degrees on Tuesday, paring back losses from Monday.
• The US Treasury is set to auction its always important 10-year note.
• The US Dollar Index jumps back above 104.50 and looks set to stretch back to 105.

The US Dollar (USD) is recovering firmly as it is parring earlier losses from Monday. The biggest supporter for the stronger Greenback in European trading hours is the Polish Zloty (USD/PLN), which is up 1.40% intraday. The surprise rate cut from the Polish Central Bank last week is weakening the Central European currency for a fourth straight day against the Greenback.  

Although the calendar is still holding any important data points, expect traders to start prepositioning for the US Consumer Price Index report (CPI) due Wednesday. The Bid/Cover ratio in the US 10-year note, meanwhile, will give investors good insight into whether participants believe the US can still bear these higher rates and refund its maturing debt in the meantime. Expect to see yields creep higher again in the US as ample supply is being issued yet again in the markets. 

Daily digest: US Dollar stronger by debt

• Traders will have seen a blip on several charts in Euro and US Dollar against other currencies around 01:00 GMT. Several banks are confirming that a fat-finger event occurred where a $600 million forex order was given, instead of the foreseen $60 million. The peak or dip was quickly pared back once the mistake was discovered, though it triggered anomalies across the board in several major pairs. 
• Kick-off for the US macro data this week is at 10:00 GMT for the Business Optimism Index from the National Federation of Independent Business (NFIB). The previous number was at 91.9 with no expectations pencilled in. 
• Near 12:55 GMT, the US Redbook Index is expected with the previous number at 4.1%. No expectations foreseen here. 
• At 17:00 GMT, the much anticipated US 10-year note will be auctioned. The previous rate was at 3.99% and is expected now to be above 4%. Traders will look at the bid-cover ratio as well to see how big the appetite was for this auction as yields will be fixed higher. 
• Equities are taking a small step back after the Japanese Topic Index closed up 0.80% for this Tuesday. 
• The CME Group FedWatch Tool shows that markets are pricing in a 93% chance that the Federal Reserve will keep interest rates unchanged at its meeting in September. 
• The benchmark 10-year US Treasury bond yield trades at 4.28% and remains elevated even after the step back on Monday. 

US Dollar Index technical analysis: Resilient Greenback

The Greenback has already pared back more than half of its incurred losses from Monday. The winning streak from last week got briefly interrupted and could be seen continuing. Should the US Dollarindex (DXY) break above the high of Monday, expect to see another upbeat week for the US Dollar Index 

The new high to watch is at 105.16, both the high from last Thursday and the six-month high. The US Dollar Index first needs to gain back its lost territory from this Monday and break above the peak of Thursday mentioned here before. From there, the next high is at 105.88, the high of 2023.

On Monday, 104.44 kept it together and refrained from allowing the DXY from selling off any further. The high of August 25 did its job and acted as a pivotal level. Should the uptick from this Tuesday reverse and 104.44 gives way, a substantial downturn could take place to 103.04, where the 200-day SMA comes into play for support.