US Dollar rally continues as investors double down on Trump trades

• The US Dollar takes off again and crushes all its G20 peers. 
• The Trump trade is the main driver underpinning the Greenback. 
• The US Dollar index makes its way through a string of strong resistances. 

The US Dollar (USD) extends its rally on Tuesday as the Trump trade adds another wave of US Dollar buying. The Greenback is crushing markets, steamrolling across the quote board against other major currencies. A goldilocks momentum is taking place with the US Federal Reserve (Fed) sticking to its interest-rate cutting cycle, while the rollout plan from President-elect Donald Trump is favouring equities due to prospects of stimulus and tax reduction packages once Trump takes office. 

The US economic calendar is rather empty this Tuesday in terms of data, with the numbers from the National Federation of Independent Business (NFIB) and from the TechnoMetrica Institute of Policy and Politics. Markets will rather focus on the batch of Fed speakers who will be speaking this Tuesday. After Fed Chairman Jerome Powell vowed that the Fed will remain data-dependent, a continuation of the rate-cutting cycle could fuel the current Trump trade rally in equities and the US Dollar even more. 

Daily digest market movers: Steamrolling 

• The National Federation of Independent Business (NFIB) Optimism index, which gauges sentiment among US small and medium-sized firms, came in at 93.7 in October, up from 91.5 a month earlier and beating market expectations.
• The TechnoMetrica Institute of Policy and Politics will release its Economic Optimism data for November around 15:00 GMT. A similar pattern as with the NFIB number is expected, ticking up to 47.3, from 46.9.
• Four Fed speakers are set to release comments to the markets: 
  • At 15:00 GMT, Federal Reserve Governor Christopher Waller delivers a keynote speech at the Clearing House Annual Conference in New York.
  • Around 15:15 GMT, Federal Reserve Bank of Richmond Thomas Barkin delivers a speech and participates in a moderated Q&A session at the Together Summit in Baltimore.
  • At 19:00 GMT, Federal Reserve Bank of Minneapolis President Neel Kashkari participates in a moderated conversation on "The Fed's New Focus" at the Yahoo Finance Invest event in New York.
  • Finishing off this Tuesday at 22:00 GMT, Federal Reserve Bank of Philadelphia Patrick Harker delivers a speech about Fintech, AI & the Changing Financial Landscape at the Carnegie Mellon University Lecture Series.
• Equities are giving back Monday’s gains, with European indices sinking near 1%. US Futures look bleak ahead of the US Opening bell. 
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 68.8%. A smaller 31.2% chance is for rates to remain unchanged. While the rate-cut scenario is the most probable, traders have pare back some of the rate-cut bets compared with a week ago.
• The US 10-year benchmark rate trades at 4.35%, up sharply after the bank holiday on Monday.  

US Dollar Index Technical Analysis: Slicing through

The US Dollar Index (DXY) is being fueled by the Trump trade, which is steamrolling through markets for a second day in a row. There is even a Goldilocks scenario on the table where the Fed is still cutting while markets are cheering ahead of President-elect Donald Trump taking office. A small caveat here might be that markets will have priced in everything too quickly before President-elect Trump is able to issue any measure at all. 

This Tuesday, the rather heavy 105.89 (May 2 high) is being tested as resistance. Once that level is broken, 106.52, the high of April and a double top, will be the last level standing before starting to talk about 107.00.

On the downside, the round level of 104.00 and the 200-day Simple Moving Average (SMA) at 103.87 should refrain from sending the DXY any lower. Before that level, there is not much in the way with maybe some slim support at 104.63 (high of October 30). 

US Dollar Index: Daily Chart