DXY inter-markets: FOMC seems to be key

The greenback – tracked by the US Dollar Index – remains on the defensive during the first half of the week, shedding further ground to the vicinity of the key support at 98.00 the figure ahead of key releases in the US manufacturing sector.

Despite the ongoing correction lower, USD remains supported by a good performance of the yields in the US money markets as of late, with the 10-year benchmark climbing to multi-month tops although losing some ground afterwards.

According to CME Group’s Fed Watch tool, the probability of a rate hike by the Fed by end 2016 remains around 70%, keeping intact the support for the buck or at least limiting the downside.

The upcoming FOMC gathering on Wednesday could probe to be vital for USD’s bullish aspirations, as the Committee could give markets a stronger hint on a potential move at the December meeting.

In that case, the recent high just above the 99.00 mark emerges as the next hurdle followed by March tops in levels just shy of the critical 100.00 limestone. In case USD-bulls get disappointed tomorrow, the 20-day sma at 97.90 appears as the initial transitory support, while the constructive tone remains unchanged as long as the 4-month support line underpins, currently in the mid-95.00s.