US Dollar reverses its course, weighted by falling US yields

NEW YORK (November 8) The US Dollar (USD) accelerated its gains in Wednesday's session with the DXY index, which measures the value of the US Dollar versus a basket of global currencies, escalating to a high of 105.90 earlier in the session. That said, the index reversed its course and declined toward 105.55, weighed down by falling Treasury yields. No highlights were seen during the session.

Markets remain quiet this week as investors await fresh catalysts to place their bets on the next Federal Reserve (Fed) decision in December. Several officials were on the wires on Monday and Tuesday but didn’t provide any highlights. The focus seems to have turned to next week’s October inflation figures from the US.

Daily Digest Market Movers: US Dollar upside limited as US yields lose traction

• The US Dollar Index stands with mild gains at 105.55.
• No high-tier reports will be released this week. Markets await next week’s inflation figures from the US and are still digesting last Friday’s US Nonfarm Payrolls report.
• The US Bureau of Labor Statistics reported that the Nonfarm Payrolls from October came in lower than expected. The US added 150,000 jobs in October vs the expected 180,000 and decelerated from its revised previous figure of 297,000.
• The Unemployment Rate came in at 3.9% in October, above the expected 3.8% and accelerating compared to its previous reading of 3.8%.
• Average Hourly Earnings increased by 0.2% MoM but rose 4.1% YoY, higher than the expected 4% but beneath the previous reading of 4.3%.
• Meanwhile, the 2-year Treasury rate is flat at 4.90%, while the longer-term 5 and 10-year rates declined to 4.53% and 4.52%, respectively, which seems to be limiting upside for the USD.
• According to the CME FedWatch Tool, the odds of a 25-basis-point hike in December are extremely low, around 10%. 
• Escalating tensions arise in the Middle East after an American plane was shot down by Yemeni soldiers, news that may provide a cushion to the Greenback.

Technical Analysis: US Dollar Index struggles to gain momentum, bears around the corner

Based on the daily chart, the DXY Index shows indications of bullish exhaustion, leading to a neutral to bearish technical outlook. The Relative Strength Index (RSI) shows a weakening bullish trend with a negative slope below its midline, while the Moving Average Convergence (MACD) exhibits neutral red bars.

What gives the outlook neutrality is the index staying below the 20-day Simple Moving Average (SMA) but above the 100 and 200-day SMAs, indicating that the bulls still have the upper hand in the broader picture.

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