US dollar index rejected from 98.00, retreats from multi-month highs

The US dollar changed its direction on Thursday and failed to hold to gains. During the Asian session, risk aversion boosted the Greenback but then it lost strength. On New York, it retreated erasing all gains and extended the decline versus the Japanese Yen as Wall Street trimmed losses. 

The US Dollar index, which gauges the US dollar against its main competitors, peaked at 98.07, the highest level since March but then turned to the downside and near the end of the session ti was trading at daily lows at 97.45. The index was falling 0.47% after posting yesterday an important gain and the highest close since March 02. 

A day between yesterday’s minutes and tomorrow’s reports 

They key event of the week so far was the release of the FOMC minutes from the September meeting. They showed that the decision to keep rates unchanged was a “close call” and mentioned that reasonable arguments could be made, either for an increase in rates or for waiting for additional information.  

The FedWatch Tool from CME Group showed today a decline in the odds of a rate hike during 2016 from 70% to 65%. Regarding the next FOMC meeting, the odds rose today but remain under 10%. 

Economic data on Thursday showed that the labor market remains solid. Initial jobless claims were at 246,000 in the week ended October 7, the same as the week before and the lowest since 1973. Tomorrow will be the busiest day regarding US data with the release of retail sales, wholesale inflation, and consumer confidence.

Despite the minutes and the data, the US dollar index had the worst day in three weeks, showing not necessarily a sharp decline, but instead how constant had been dollar gains since mid-September. 

Relevant levels

To the upside, resistance levels could be seen at 98.05/10 (daily high), 98.59 (Mar 3 high) and 99.00 (psychological). On the downside, the initial support might be located at 97.40 (Oct 12 low), 97.15/20 ( Oct 7 high) and 97.00.