US Dollar Index stays depressed around 109.50 with eyes on US mid-term elections, inflation

• US Dollar Index dribbles around the lowest levels in seven weeks.
• Surprise optimism amid challenges to Democrats in the US mid-term elections drowned DXY of late.
• Equities, bonds ignored covid fears from China to print gains.
• Risk catalysts, China inflation data could entertain traders ahead of Thursday’s US CPI.

US Dollar Index (DXY) holds onto the bearish move around a nearly two-month low during early Wednesday. That said, the greenback’s gauge versus the six major currencies dropped to the lowest levels since September 20 the previous day before recently taking rounds to 109.50.

The uncertainty surrounding the Democratic Party’s control in both houses failed to tame the equities, as well as the bonds the previous day. The reason could be linked to the market’s hopes of easy spending and less strong inflation due to the Republican Party’s likely victory in at least one house of decision-making.

Also weighing on the DXY could be the recently softer data and comments from the US Federal Reserve (Fed) policymakers who suggested challenges for further rate hikes. That said, the US NFIB Small Business Optimism Index for October dropped to 91.3 versus 92.1 prior.

Alternatively, a six-month high of the fresh covid numbers from China bolstered the market’s fears of multiple lockdowns and challenged the US Dollar Index sellers of late. Also likely to have tested DXY bears could be the anxiety ahead of the key inflation data from China and the US.

Amid these plays, Wall Street closed positive for the third consecutive day while the US 10-year Treasury yields snapped a four-day uptrend. It should be noted that the S&P 500 Futures print mild gains at the latest.

Moving on, a light calendar in the US may restrict the DXY moves even if the likely easing in China’s inflation and covid woes appear to weigh on the greenback’s gauge.

Technical analysis

A one-month-old descending support line joins 100-DMA to challenge the US Dollar Index bears around 109.30.