US Dollar Index under pressure near 97.30, looks to data

• DXY challenges weekly lows around 97.30.
• The Fed cut rates and hints at a pause in December.
• Focus now shifts to Payrolls on Friday.

The Greenback remains well on the defensive so far this week, now returning to the area of multi-day lows near 97.30 when tracked by the US Dollar Index (DXY).

US Dollar Index offered post-Fed

After a brief spike to fresh tops in the 98.00 neighbourhood, the index not only faded that up move but it has also intensified the downside to the current 97.30 region as market participants continue to digest the recent FOMC event.

In fact, the Federal Reserve, as expected, reduced by 25 bps the FFTR on Wednesday as well as the interest rate paid on reserves. Despite the Committee reiterated once again the solid health of the labour market and consumer spending, it did express concerns over the business fixed investment and the exports sector.

Moving forward, the Fed is expected to stay in a ‘wait-and-see’ mode in the next couple of months, although further deterioration in the global economic outlook and the lack of a final solution on the US-China trade front could motivate the Fed to resume the easing mood early in 2020.

Data wise today, Challenger Job Cuts are due seconded by inflation figures tracked by the Core PCE, usual weekly Claims, Personal Income/Spending and the Chicago PMI.

What to look for around USD

DXY came under extra downside pressure despite the Fed matched initial expectations by lowering rates at Wednesday’s meeting and signalling a pause in the easing cycle in the near term at least. The Fed is now expected to remain vigilant mainly on the global scenario, where trade concerns and the impact on global growth remain in centre stage amidst the loss of momentum in the domestic economy. On the broader view, the constructive outlook in DXY looks a bit damaged but it still is in play as the Fed moves into an impasse vs. the dovish stance from its G10 peers, the Dollar’s safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is losing 0.09% at 97.36 and faces immediate contention at 97.14 (monthly low Oct.18) seconded by 97.03 (monthly low Aug.9) and then 96.67 (low Jul.18). On the upside, a break above 98.00 (high Oct.30) would open the door to 98.32 (55-day SMA) and finally 99.25 (high Oct.9).