USD Index: Bears control the sentiment just above 106.00

• The index manages to bounce off lows near 105.80.
• Retail Sales expanded more than expected in October.
• Industrial Production disappointed consensus last month.

Following an earlier drop to the 105.80 region, the USD Index (DXY) picked up some traction and is back above the 106.00 mark on Wednesday.

USD Index rebounds on positive data

Despite the bounce off lows, the index remains entrenched in the negative territory amidst persistent investors’ repricing of the next steps of the Federal Reserve when it comes to future interest rate hikes.

So far, market participants keep leaning towards a 50 bps rate raise at the December 14 event, according to the FedWatch Tool gauged by CME Group.

In the US data space, MBA Mortgage Applications increased 2.7% in the week to November 11, while Retail Sales expanded 1.3% in October vs. the previous month and Industrial Production unexpectedly contracted 0.1% MoM also in October.

Later in the session, the NAHB Index, Business Inventories and TIC Flows will all close the daily calendar.

In addition, NY Fed J.Williams (permanent voter, centrist) and FOMC’s C.Waller (permanent voter, dove) are also due to speak along with another testimony by FOMC’s S.Barr.

What to look for around USD

Price action around the dollar remains depressed and relegates the index to navigate in the area of multi-month lows around the 106.00 zone.

In the meantime, the greenback is expected to remain under the microscope amidst persistent investors’ repricing of a probable slower pace of the Fed’s rate path in the upcoming months.

Key events in the US this week: MBA Mortgage Applications, Retail Sales, Industrial Production, Business Inventories, NAHB Index, TIC Flows (Wednesday) - Building Permits, Initial Jobless Claims, Housing Starts, Philly Fed Index (Thursday) - CB Leading Index, Existing Home Sales (Friday).

Eminent issues on the back boiler: US midterm elections. Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is retreating 0.41% at 106.13 and the breakdown of 105.34 (monthly low November 15) would open the door to 104.94 (200-day SMA) and finally 104.63 (monthly low August 10). On the other hand, the next up barrier aligns at 109.11 (100-day SMA) seconded by 110.87 (55-day SMA) and then 113.14 (monthly high November 3).