US Dollar strengthens ahead of eventful Thursday

• The Greenback rallies for a third straight day this week.
• US yields continue to increase, nearing the 5% threshold again.
• The US Dollar Index edges up after breaking back above 106.00. 

The US Dollar (USD) keeps churning higher this week after having a small and brief retreat on Monday. The biggest catalyst for this recovery is the bond market. Still, all eyes will be across the Atlantic on Thursday with the European Central Bank (ECB) set to issue its latest monetary policy decision, which possibly is going to trigger further US Dollar strength. 

On the economic data front, no less than thirteen data points are set to be issued all at the same time, at 12:30 GMT. Amidst all that, the ECB will release its interest rate decision and statement and ECB President Christine Lagarde will give a press conference. Expect plenty of headlines to come out and very volatile moves in the US Dollar Index (DXY), in the EUR/USD pair and other major crosses where the Greenback is involved. 

Daily digest: US Dollar steps up to the plate

• The European Central Bank (ECB) is set to release its Interest Rate Decision at 12:15 GMT, together with a written statement. Economists expect the ECB to keep rates unchanged after ten consecutive hikes.
• At 12:30 GMT, a big batch of US data will be released:
  1. Initial Jobless Claims are expected to head from 198,000 to 208,000. Continuing Claims are expected to head a little bit higher, from 1,734,000 to 1,743,000.
  2. Personal Consumption Expenditures (PCE) Price Index for the third quarter are due to come out, with the Core Index expected to drop from 3.7% to 2.5%.
  3. Gross Domestic Product (GDP) data for the third quarter: the Price Index component is expected to soar from 1.7% to 2.5%. The Annualised growth rate is to head from 2.1% to 4.2%.
  4. Durable Goods preliminary reading for September are to come out as well:: The headline index is expected to head from 0.1% to 1.5%. The component without transportation is expected to slow from 0.4% to 0.2%. 
• Just 15 minutes later, at 12:45 GMT, ECB President Christine Lagarde is due to give a press conference with Q&A. 
• During that same press conference from the ECB, around 13:00 GMT, headlines or comments are expected from the Federal Reserve member Christopher Waller. 
• US housing data around 14:00 GMT, with Pending Home Sales: Sales are expected to decline 1.5% in September compared with the previous month, less than the 7.1% plunge seen in August. On an annual basis, Pending Home Sales declined 18.3% in August.
• The Kansas City Fed Manufacturing Index for October is expected around 15:00 GMT. The previous reading came at -13.
• The US Treasury will try to refund two tenors this Thursday: at 15:30 a 4-week bill to be auctioned, and at 17:00 GMT a 7-year note to be allocated. 
• Equities are seeing investors flee ahead of the volatility this Thursday: Asian equities are sinking over 1% in Japan and Chinese equities are down by 0.5%. European equities are not expecting any help from the ECB this Thursday, and are sliding more than 1% . In the US, Nasdaq futures fall by 1.5%, while Dow Jones and S&P 500 futures are down by 1%.
• The CME Group’s FedWatch Tool shows that markets are pricing in a 97.1% chance that the Federal Reserve will keep interest rates unchanged at its meeting in November. 
• The benchmark 10-year US Treasury yield trades at 4.98%, popping back to that feared 5% level. The million Dollar question here is what will happen once the benchmark breaks back above 5%.

US Dollar Index technical analysis: All hail king Dollar

The US Dollar is climbing the ladder again after being in the gutter at the start of the week. The Greenback is on its way back to its throne as the DXY US Dollar Index is shooting higher and might even stretch further. Risk element hanging over a possible implosion of the DXY hangs in the balance, with the US 10-year yield flirting again with 5%.

The DXY has consolidated above 106.00 and looks to keep stretching higher. Look for a possible jump above 106.92. If this level can be reclaimed by US Dollar bulls, then look for 107.00 on the topside again. 

On the downside, the recent resistance at 105.88 did not do a good job supporting any downturn and now completely has lost its importance. Instead, look for 105.12, which is a pivotal historic line and almost falls in line with the 55-day Simple Moving Average (SMA) to keep the DXY above 105.00, and which worked already quite ahead of it on Tuesday. Should this level fail to do the trick, a big air pocket could develop and see the DXY drop to 103.74, near the 100-day SMA, before finding ample support.