US Dollar starts off week asleep after last week’s questionable performance

• The Greenback was able to print a weekly gain on Friday. 
• A lighter week begins with only Retail Sales and Powell’s speech as focal points. 
• The US Dollar Index was unable to print a new weekly high and might still reverse. 

The US Dollar (USD) showcasing its resilience last week might leave traders and investors wrongfooted to start the coming week. Headline inflation might have ticked up a touch, pressing the market’s nerves with rates soaring back to 52-week highs as a result. Although the US Dollar Index (DXY) eked out a weekly gain on Thursday and Friday, it was yet again a very close call as the Greenback rally  stutters here on Monday. 

No big data points are scheduled on Monday, so expect fewer sharp moves in the market. One element to keep an eye on is Central Europe, where in Poland saw a big power shift happen on Sunday during elections. One of the opposition parties is set to gain a majority over the ruling party, and the Polish Zloty appreciated by over 1.5% against the Greenback. All Central European currencies, in fact, are up against the Greenback. 

Daily digest: US Dollar knee jerks everyone

• At 12:30 GMT, the New York Empire State Manufacturing Index for October is due to come out: Previously, the print was 1.9, and a contraction is expected to -7.
• The US Treasury is set to issue a few auctions with a 3-month and a 6-month bill auction at 15:30 GMT.
• To round up the calm Monday, expect to see comments from Patrick Harker from the Federal Reserve of Philadelphia at 20:30 GMT.
• Equities are sliding lower with the Japanese Nikkei down over 2%. The Chinese Shanghai Shenzhen Composite slides over 1%. Meanwhile, European equities are rallying higher on that pro-European opposition in Poland set to claim victory in the Polish elections. US futures are mildly in the green. 
• The CME Group’s FedWatch Tool shows that markets are pricing in a 90.2% chance that the Federal Reserve will keep interest rates unchanged at its meeting in November. 
• The benchmark 10-year US Treasury yield soared to 4.68% and is ticking up a touch this Monday.  

US Dollar Index technical analysis: Is the Greenback star fading?

The US Dollar might be popping back into its normal regime from the past few months by overtaking the summer rally trendline. Do not pop the champagne just yet though as no weekly high got printed. Meanwhile, the US Dollar Index (DXY) this Monday is opening below the closing price from Friday, which could point to some selling and might see the DXY fade lower in search of support. 

A bounce above the daily trendline from July 18 might still materialise. 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.