DXY inter-markets: scope for consolidation

The US Dollar Index (DXY) – which gauges the buck against a basket of its main rivals – is posting its first daily gain after three consecutive pullbacks, recovering the 101.00 handle and above after buyers have showed up around the key support area at 100.70/60.

Despite a rate hike by the Federal Reserve is practically priced in by market participants at the December meeting, the likeliness of future (and faster?) tightening of the monetary conditions by the Fed emerges as the next significant driver for the greenback in the periods ahead, all backed by the prospects of looser fiscal policy under Trump’s presidency.

In addition, auspicious results from the US docket as of late have added to a scenario of higher rates in the US economy in the next quarters, collaborating with the view of a stronger dollar.

Furthermore, US yields keep their solid performance, with the 10-year benchmark climbing towards the 2.30/40% area, last seen in July 2015, further propping up the dollar and widening the spread differential vs. its global peers.

Adding to the above, USD speculative longs have increased to the highest level since mid-August 2015 (more than 72K contracts), taking net longs to 3-week tops during the week ended on November 22 and according to the latest CFTC report.

Technically, the initial support zone is located in the 100.70/60 band ahead of the 99.70/85 band, where sits the 20-day sma and the 23.6% Fibo retracement of the 91.88-102.19 up move. The bullish bias remains intact, however, while above the support line off 2016 lows, currently around 96.00, which is reinforced at the same time by the 200-day sma at 96.10.