US Dollar Index bulls struggle near 111.50 despite hawkish Fed bets, focus on US ISM PMI

• US Dollar Index seesaws near one-week high, snaps three-day uptrend.
• Cautious mood ahead of the key data/events probe yields even as Fed wagers keep bond bears hopeful.
• Softer US data, comments from Biden, Putin appeared to have probed DXY bulls of late.
• Second-tier US statistics could entertain buyers but FOMC, NFP are the key.

US Dollar Index (DXY) fades the upside momentum near 111.50 during early Tuesday, following a three-day run-up. In doing so, the greenback’s gauge versus the six major currencies traces sluggish US Treasury yields amid the market’s indecision ahead of the key central bank announcements, as well as the US employment data.

US 10-year Treasury yields remain sidelined near 4.05% by the press time, after rising in the last two consecutive days. It’s worth noting that the bond yields snapped a 10-week uptrend with the previous week’s negative closing. Even so, the bond coupons ended October on a firmer footing while posting the third positive closing.

That said, the downbeat US data and hopes of more easing in the oil prices, and inflation in turn, appeared to have exerted downside pressure on the US dollar.

On Monday, the US Chicago Purchasing Managers’ Index and Dallas Fed Manufacturing Business Index for October came in at 45.2 and -19.4 versus 47.0 and -15.0 expected respectively.

Comments from US President Joe Biden and Russian leader Vladimir Put appeared to have also eased the market’s fears and seemed to have probed the DXY bulls of late.

“US President Joe Biden on Monday called on oil and gas companies to use their record profits to lower costs for Americans and increase production, or pay a higher tax rate, as he battles high pump prices with elections coming in a week,” said Reuters. On the other hand, Russia’s Putin said he can set up a gas hub in Turkey ‘quite quickly’ and was sure gas contracts will be signed. The Russian leader also added that there will be many in Europe who want to do so.

Amid these plays, Wall Street printed the first daily loss in three but S&P 500 Futures print mild gains at the latest. It should, however, be noted that the CME’s FedWatch Tool signals a nearly 90% chance of the Fed’s 75 basis points of a hike on Wednesday’s all-important Federal Open Market Committee (FOMC) meeting, which in turn keeps the US Dollar buyers hopeful.

It should be noted that the US ISM Manufacturing PMI, likely to ease to 50.0 versus 50.9 prior, will direct immediate DXY moves. Following that, the US S&P Global Manufacturing PMI for the stated month, expected to confirm the initial forecast of 49.9 figure, will join the JOLTS Jobs Openings for September, forecast 10M versus 10.053M prior, to also entertain the pair traders.

Technical analysis

US Dollar Index remains off the buyer’s radar unless breaking a convergence of the previous support line from early August and a one-month-old descending resistance line, around 112.10-15 by the press time.