US Dollar extends gains as China hangs in the ropes

• The US Dollar is in the green against nearly every G20 peer on the quote board.
• Traders are finally starting to hedge in volume for a possible Trump win in November. 
• The US Dollar Index breaks above a key level on its way to 104.00. 

The US Dollar (USD) adds to gains for a fifth consecutive day when looking at the US Dollar Index (DXY), which can be seen as the benchmark for the Greenback’s performance. China’s Housing Minister said on  Thursday that the country will open a 4 trillion Yuan (CNY) funding to support its domestic housing market, a quite lower number than the initial 6 trillion Yuan communicated on Monday, and adds to momentum for the United States (US) former President Donald Trump to take more lead in the polls in the run-up to the November 5 Presidential Elections day. 

The US economic calendar is full on Thursday. Besides the usual weekly Jobless Claims, Retail Sales and several leading indicators will be released about the US economy and activity. In case that is not enough, the European Central Bank (ECB) is set to deliver another 25 basis point (bps) rate cut according to consensus, with the main question if ECB President Christine Lagarde dares to deliver a hawkish rate cut while Europe’s economic engine, Germany, is severely stuttering. 

Daily digest market movers: A lot of data to read through

• The US calendar kicks off at 12:30 GMT with a bulk release of data:
  • The weekly Jobless Claims:
    • Initial Claims for the week ending on October 11 are expected to remain stable at 258,000, as the previous week.
    • The Continuing Claims for the week ending on October 4 are expected to increase to 1.87 million from the prior 1.861 million.
    • IT will be interesting to see how the hurricanes in Florida and the Gulf region have influenced the claims numbers. 
  • September Retail Sales:
    • The monthly headline Retail Sales is expected to rise by  0.3%, compared to 0.1% in the previous reading.
    • The monthly Retail Sales, excluding cars and transportation, should grow at a steady pace of  0.1%.
  • The Philadelphia Fed Manufacturing Survey for October is expected to tick up to 3.0, coming from 1.7 in September. 
• At 13:00 GMT, Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee delivers welcoming remarks at the Fifth Annual Exploring Career Pathways in Economics and Related Field Conference.
• At 13:15 GMT, the Fed releases the Industrial Production data for September, which is expected to shrink by 0.2% against the growth of 0.8% seen in August.
• At 14:00 GMT, the National Association of Home Builders (NAHB) will release its monthly Housing Market Index for October. The expectation is for an uptick to 43 against the 41 from September. 
• The European Central Bank (ECB) will release its rate decision at 12:15 GMT, followed by a press conference where ECB President Christine Lagarde will deliver a speech and take Q&A around 12:45 GMT. 
• Equities in Asia are seeing investors being disappointed with a tepid reaction to China's supportive measures on its domestic housing sector. Both Japan’s and China’s equity indices have closed in the red. European equities are doing better with hopes from traders for a rate cut from the ECB, while US futures are trading flat to mildly higher. 
• The CME Fed rate expectation for the meeting on November 7 shows a 92.1% probability of a 25 bps rate cut, while the remaining 7.9% is pricing in no rate cut. Chances for a 50 bps rate cut have been fully priced out. 
• The US 10-year benchmark rate is trading at 4.04% after having flirted with a break below 4% on Wednesday. 

US Dollar Index Technical Analysis: The Trump protection

The US Dollar Index (DXY) is rallying with more and more headlines and media channels, starting to pick up on a possible Trump win in the US presidential elections in November. It looks like that trading desks are starting to hedge for that event, with the risk that the US Dollar will continue to rally into the event and can only reverse once it is done, no matter who won. Thus, a big attention point is that the DXY might become a “buy the rumour, sell the fact” event in the coming weeks. 

A firm resistance is ahead at 103.79, which aligns with the 200-day SMA. Above that, there is a small gap before hitting the pivotal level at 103.99 and the 104.00 big figure. Should Trump further lead in the polls, a rapid swing up to 105.00 and 105.53 could be on the cards. 

On the downside, the 100-day SMA at 103.20 and the pivotal level at 103.18 are now acting as support and should prevent the DXY from falling lower. With the Relative Strength Index in overbought territory, a test on this level looks granted. Further down, the 55-day SMA at 101.84 and the pivotal level at 101.90 should avoid further downside moves. 

US Dollar Index: Daily Chart