US Dollar Index rebound eyes 94.00 even as DXY bulls await US GDP, ECB duet

• DXY consolidates losses after snapping two-day recovery from monthly low.
• Fed tapering tantrums gain momentum amid firmer inflation expectations, stronger US GDP can favor bulls.
• ECB may print hawkish mood but greenback buyers will have fewer challenges to note.

US Dollar Index (DXY) rebound aim for another battle with the 94.00 threshold during early Thursday. The greenback gauge dropped for the first time in three days the previous day as cautious sentiment weighed on the US Treasury yields. However, the following recovery moves fail to regain traction amid a wait-and-watch mode of the markets ahead of the preliminary US Q3 GDP and monetary policy meeting of the European Central Bank (ECB).

Although fears of fresh US-China tussles, over issues concerning telecom and Taiwan, put a carpet under the US dollar weakness, the DXY tracked the US Treasury yields to print the heaviest daily fall of the week. That being said, the US 10-year Treasury yields dropped the most since mid-August on Wednesday, recently picking up bids to 1.54%, up 1.2 basis points (bps).

Also weighing on the US Treasury yields and the DXY were hopes of tighter monetary elsewhere, reducing the safe-haven appeal of the US currency. Recently, the Bank of Canada (BOC) announced the end of bond purchases and the UK also cuts bond issuance. Further, Australia’s strong prints of the RBA Trimmed Mean CPI also push the Reserve Bank of Australia (RBA) towards a rate hike.

It’s worth noting that the US inflation expectations step back from the highest since May 2006 and add to the downside pressure on the DXY. Furthermore, mixed data could also be cited as an additional catalyst for the greenback’s recent weakness. The US Good Trade Balance shrank more than expected in September but the Durable Goods Orders dropped lesser-than-forecast for the stated month.

Looking forward, the US Q3 GDP will be crucial for the DXY bulls as hopes of a firmer outcome backing the Fed tapering plans are high. It should be observed that any negative surprise will also be dealt with with a magnified response.

Read: US Third Quarter GDP Preview: A most uncertain estimate

Additionally, the ECB is up for a hawkish show but the Euro region problems, including Brexit, politics and deficits, may dim the event’s impact on the US Dollar Index.

Read: European Central Bank Preview: Finally, some action, but no hopes for the EUR

Technical analysis

The 21-DMA hurdle surrounding the 94.00 threshold challenges the DXY bulls targeting the yearly top near 94.55. However, downside moves remain less worrisome until staying beyond the weekly swing low near 93.50.