US Dollar Index regains 107.00 as Fedspeak underpins firmer yields, focus on US PPI, Retail Sales

• US Dollar Index stays defensive after the previous day’s rebound from a three-month low.
• Fed policymakers highlight pivot talks, inflation concerns to favor the DXY.
• China data dump and risk catalysts are important for clear directions.
• Buyers could cheer hopes of firmer rate hike, indecision over inflation concerns ahead of the key US statistics.

US Dollar Index (DXY) remains indecisive while struggling to extend the previous day’s U-turn from the lowest levels since mid-August, taking rounds to 106.95 during Tuesday’s Asian session. In doing so, the greenback’s gauge versus the six major currencies awaits clear directions amid sluggish hours of trading while waiting for the key US economics.

Even so, the DXY buyers remain hopeful as the latest commentary from the US Federal Reserve (Fed) officials renews inflation fears. Recently, Vice-Chair Lael Brainard favored a 50 bps rate hike but also stated, “We have additional work to do.” Earlier on Monday, Federal Reserve Governor Christopher Waller also promoted the ideal of a 0.50% rate hike while also warning against the market’s perception of the pivot.

Elsewhere, an absence of positive headlines from the first face-to-face meeting between US President Joe Biden and his Chinese counterpart Xi Jinping weighs on the market sentiment. On the same line could be the recently firmer Covid numbers from the dragon nation as Guangzhou reports 5,124 new local Covid-19 cases as of 00:00 November 15, 2022. With this, the daily numbers turn out to be double what they were over the weekend.

It’s worth noting, however, that China’s recent efforts to defend the struggling real-estate markets and easing of the Covid-linked activity restrictions keep the DXY buyers hopeful, due to the greenback’s safe-haven appearance.

Amid these plays, S&P 500 Futures remain sidelined near 3,975-80, after reversing from a two-month high the previous day, whereas the US Treasury yields remain inactive near 3.86% following the first daily gain in four.

Looking forward, the risk catalysts will be crucial for the DXY moves amid a light calendar. However, China’s data dump for October and the US Producer Price Index (PPI) for the said month, expected at 8.3% YoY versus 8.5% prior, should also be watched carefully for clear directions ahead of the US Retail Sales.

Technical analysis

DXY recovery remains elusive unless crossing October’s trough surrounding 109.55. The downside moves, however, need to conquer the 200-DMA support of 105.82 to convince bears.