US Dollar Index extends the downside to the 93.80 region

• DXY remains on the defensive near 93.80 on Friday.
• US 10-year yields edge higher and approach 1.55%.
• Retail Sales, flash Consumer Sentiment next on tap.

The greenback loses further ground and approaches the 93.80 region when tracked by the US Dollar Index (DXY) on Friday.

US Dollar Index now looks to data

The index sheds ground for the third consecutive session and at the same time extends the rejection from YTD peaks in the 94.55/60 band recorded earlier in the week.

The mild recovery in US yields, mainly in the belly and the long end of the curve, remains unnoticed so far while the front end recedes marginally after hitting new 19-month highs in past sessions in the wake of September’s inflation figures.

In the meantime, Fedspeak remains supportive of starting the tapering process in November or December, while some concerns have re-emerged on the back of the probability that elevated inflation could last longer than previously estimated.

In the docket, the focus of attention will be on the release of Retail Sales for the month of September along with the advanced October’s Consumer Sentiment gauged by the U-Mich index, all seconded by Export/Import Prices, Business Inventories and the NY Empire State Index.

What to look for around USD

The index remains in corrective-mode and already approaches the 93.80 region, always on the back of the recent improvement in the risk galaxy, profit-taking in the buck and somewhat diminishing US yields. Looking beyond the immediate term, the dollar remains underpinned by markets’ adjustment to prospects for a “soon” start of the tapering process, probable rate hikes at some point during next year and the rising view that elevated inflation could last more than initially expected.

Key events in the US this week: Retail Sales, flash Consumer Sentiment (Friday).

Eminent issues on the back boiler: Biden’s multi-billion Build Back Better plan. US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. Debt ceiling debate. Geopolitical risks stemming from Afghanistan

US Dollar Index relevant levels

Now, the index is losing 0.10% at 93.89 and a break above 94.56 (2021 high Oct.12) would open the door to 94.74 (monthly high Sep.25 2020) and then 94.76 (200-week SMA). On the flip side, the next down barrier emerges at 93.75 (weekly low October 14) followed by 93.67 (monthly low Oct.4) and finally 92.98 (weekly low Sep.23).