US Dollar looks set for ninth consecutive week of gains

• The US Dollar flattens on Friday as investors take profits after its rally on Thursday.
• Traders are letting the dust settle on the lacklustre performance of the Euro after ECB’s dovish hike.
• The US Dollar Index is above 105.00, though faces some profit taking ahead of the weekend.

The US Dollar (USD) got the wind in its sales after a very volatile afternoon on Thursday had faith falling in favor of the Greenback. A dovish hike from the European Central Bank prompted traders to sell  the Euro in the conviction the Eurozone economy will crash. Meanwhile, Retail Sales data out of the US and Producer Price Index numbers signalled that the US economy  looks to head for that soft landing. 

The Greenback will need to perform on its own this Friday as already in early morning trading some profit taking is happening ahead of the weekend. The University of Michigan Consumer Sentiment print will determine whether the US Dollar Index (DXY), which tracks the value of the USD against a basket of currencies, will close below or above 105.00. Another weekly positive close for the US Dollar hangs in the balance, with chances that the DXY will close in green for a ninth straight week.

Daily digest: US Dollar faces profit taking ahead of Michigan Sentiment

• Plenty of datapoints to process on Friday.  At 12:30 GMT, the Import and Export Price Indexes for August are due, both monthly and yearly prints. The Export Price Index is expected to increase 0.3% on month in August, less than the 0.7% rise seen in July. . The yearly index decreased by 7.9% in July and there is no no forecast for the upcoming August reading. The Import Price Index is expected to slow to 0.3% on month from 0.4%. The yearly reading decreased 4.4% in July and there’s no market forecast for August..
• Also at 12:30 GMT, the New York’s Fed Empire State Manufacturing Index for September is due to come out. Expectations are still for a negative print, though less negative, from -19 to -10.
• At 13:15 GMT, markets will digest Industrial Production data from August, which is expected to increase by a marginal 0.1%, slowing sharply from the 1% rise seen in July.  
• Focal point for this Friday comes in at 14:00 GMT with the Michigan Consumer Sentiment Index and the 5-year Consumer Inflation Expectations. The preliminary Consumer Sentiment Index for September is expected to head from 69.5 to 69.1. No forecast on the five-year inflation expectations component, which were at 3% at the end of August.. 
• Equities are in the green across the board with both the most important Asian and European indices all up near 1%. US equity futures are lagging a touch, and are all up by 0.20%.
• The CME Group FedWatch Tool shows that markets are pricing in a 97% chance that the Federal Reserve will keep interest rates unchanged at its meeting in September after the recent PPI and Retail Sales numbers.  
• The benchmark 10-year US Treasury bond yield trades at 4.30%, substantially higher to where it was at the beginning of the week. 

US Dollar Index technical analysis: On its own

The Greenback had a double jetpack strapped on Thursday. One element that boosted the US Dollar was the macroeconomic front, with the solid US Retail Sales data, lower Jobless Claims both initial and continuing, and PPI numbers confirming the Fed is on the right track. The second jetpack came from the depreciating Euro, which got hammered after a  European Central Bank meeting where Lagarde refrained to answer several simple  questions, leaving traders behind with not much belief or elements to support the Euro. 

The US Dollar Index (DXY) has edged up, reaching  as high as 105.41. This is just a sigh away from the 2023 high  near 105.88. Should the DXY be able to close above there for the week, expect King Dollar to go even stronger in the medium-turn.

On the downside, the 104.44 level seen on August 25 kept the Index supported on Monday, not allowing the DXY to sell off any further.. Should the uptick that started on 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.