US Dollar Index looks to 93.00 as Fed taper tantrums back the bulls
- DXY bulls take a breather following the heaviest daily jump in a month.
- Upbeat US data underpin Fed tapering concerns, virus woes and geopolitics also back risk-off led USD strength.
- Preliminary US Michigan Consumer Sentiment Index for September become important ahead of next week’s key FOMC.
US Dollar Index (DXY) consolidate the heaviest daily jump in a month around 92.87 during Friday’s Asian session.
The greenback gauge cheered increasing odds of the US Federal Reserve’s (Fed) tapering announcement during the next week’s Federal Open Market Committee (FOMC) meeting the previous day on firmer US data.
The US Retail Sales MoM jumped to the highest in five months while crossing expectations of -0.8% with +0.7% figures. Further, the Philly Fed gauge also rose strongly to 30.7 versus 19 forecast and 19.4 prior, marking the strongest figures in three months.
Read: Fed Preview: Three ways in which Powell could down the dollar, and none is the dot-plot
Also favoring the DXY bulls was the risk-off mood backed by were chatters that the US, the UK and Australia are indirectly challenging China with securities pact and the US hosting of the UK, India, Australia and Japan for diplomatic talks the next week. Additionally, the Sino-American tussles, recently over Taiwan, join the hurricanes that challenge oil firms in the US Gulf to add to the risk-off mood and favor the US dollar’s safe-haven demand.
As per the latest updates, the US and Australia issue joint statement showing concerns over the South China Sea claims while conveying readiness to strengthen ties with Taiwan.
Against this backdrop, Wall Street closed mixed but the US 10-year Treasury yields rose 3.2 basis points (bps) to 1.336% by the end of Thursday’s North American session. Further, the S&P 500 Futures drop 0.16% by the press time.
Given the latest escalation in geopolitical tensions, the DXY may remain on the front foot. However, cautious sentiment ahead of the US Michigan Consumer Sentiment Index for September, expected 72.2 versus 70.3 may probe the bulls amid a light calendar elsewhere.
Read: US Michigan Consumer Sentiment Preview: Markets will have to look hard for positive signs
Technical analysis
A clear upside break of 20-DMA, around 92.63 by the press time, directs US Dollar Index to 93.18-20 horizontal area established since July 21.