US Dollar Index Tries to Recover Ground Ahead of Key Data

Summary:

The US dollar index was lower for a third-straight day yesterday and was trying to recover ground ahead of two key economic releases.

The US dollar index was lower for a third-straight day yesterday and was trying to recover ground ahead of two key economic releases. The dollar awaits the release of PCE prices, which will help to clarify the inflation picture in the U.S.

The PCE is expected to come in at 1.4% and a number above this would spur buying in the greenback as traders would shorten the expected date for higher rates. The Federal Reserve had said 2023 for lower rates but this is hard to project. The dollar will also get to see ISM Manufacturing PMIs for September with analysts expecting a 56.3 print. This would be a strong expansion for the economy and would see buying in the USD.

The Euro plays a big part in the index and the single currency has been under pressure with a surge in virus cases. Germany saw the largest increase since April and France and Spain both had over 10,000 cases leading to fears over a second lockdown in Europe.

The dollar lost ground this week after the first Presidential debate failed to clarify the election picture, but the real bearish sentiment was created by the revival of talks over a second coronavirus stimulus package worth $2.2 trillion. The bill will need bipartisan support and may be watered down but the additional spending is a negative for the U.S. fiscal outlook.

Dollar Index Technical Outlook

The US dollar index was lower for a third day but the price is looking to test the 94.00 level ahead of the data. The index needs to retest the 94.62 resistance in order to keep the uptrend in play. A close below 93.50 could see the downtrend resume. The Investing Cube team is currently available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.