US Dollar bleak with US CPI numbers on the docket

• The Greenback already lost over 1.6% of its value in October.
• All eyes are on US CPI numbers later this Thursday.
• The US Dollar Index settles below 106 and is looking for support.

The US Dollar (USD) is at a crucial point in terms of positions as its summer rally quite abruptly came to a halt and took a turn for the worse. The US Dollar was unable to advance substantially on Monday when risk-off sentiment was the main theme in the aftermath of the Israel-Hamas conflict. Since then the Greenback has been retreating, and the slew of Fed speakers this week that believe the Fed is done hiking are pouring only more oil to the fire.

Traders could send the Greenback lower again with the US Consumer Price Index (CPI) numbers that will be released this Thursday. Overall expectations are for the numbers to decline further. This would confirm the recent calls from individual Fed members not to hike anymore and might send the US Dollar Index (DXY) substantially lower. 

Daily digest: US Dollar is a wounded animal

• At 12:30 GMT, the CPI numbers will be released: The overall monthly index is expected to fall from 0.6% to 0.3%. The overall yearly gauge is expected to decline from 3.7% to 3.6%. The core, meaning without food and energy in the price basket, monthly index is expected to stay steady at 0.3%. The yearly core CPI will head from 4.3% to 4.1%.
• Additionally, around that same time the Initial and Continuing Jobless Claims will appear. The Initial claims are expected to head from 207,000 to 210,000. The Continuing Claims are forecast to move from 1.664 million to 1.68 million.
• The US Treasury will auction a 4-week bill and a 30-year bond. 
• Equities are soaring with several indices jumping back in the green for their year-to-date performance. Should the US Dollar retreat further, expect to see even more support come in for equities. 
• The CME Group FedWatch Tool shows that markets are pricing in an 88.3% chance that the Federal Reserve will keep interest rates unchanged at its meeting in November. 
• The benchmark 10-year US Treasury yield is sinking lower to 4.54%. The lowest level in nearly 10 days.  

US Dollar Index technical analysis: CPI to deliver the kill shot today?

The US Dollar has started to look bleak, and any chance for a quick recovery  is hanging by a thread. Only a tick up in US inflation numbers could do the trick, although the current outlook does not really support that possibility. It looks inevitable that the US Dollar Index (DXY) will need to look further down in order to find ample support before having a possible recovery bounce. 

For a second day in a row, the DXY opens below 106, which means that this level will be the first initial hurdle to recapture. On the topside, 107.19 is important to reach if the DXY can get a daily close above that level. If this is the case, 109.30 is the next level to watch. 

On the downside, the recent resistance at 105.88 did not do a good job supporting any downturn. Instead, look for 105.12 to keep the DXY above 105.00. If that does not do the trick, 104.33 will be the best level to look for some resurgence in US Dollar strength with the 55-day Simple Moving Average (SMA) as a support level.