US Dollar afloat ahead of US Retail Sales

• The Greenback trades sideways as Monday was full of geopolitical headlines. 
• Expect some fireworks around 12:30 GMT with US Retail Sales numbers. 
• The US Dollar Index is in the middle of October’s range. 

The US Dollar (USD) was the steady boyfriend on Monday in a market that had seen a wild ride in commodities. Foremost, the energy complex had a wild ride on a bunch of comments from Iran, Turkey and the US on the Israeli-Palestinian situation. The US Dollar remained steady despite the headlines and made equities soar. 

On the data front, traders can sink their teeth into US Retail Sales, which are due this Tuesday an hour before the US stock market opens. As always, the print could produce a knee-jerk reaction as often the initial moves get contradicted by the revision of the previous number. In other words,  brace yourself for some volatility either way. 

Daily digest: US Dollar becoming data-driven

• At the start for this Tuesday, the President of the New York Fed, John Williams, is due to speak around 12:00 GMT. 
• In terms of data, this Tuesday is kicking off near 12:30 GMT with the Retail Sales numbers: The monthly Retail Sales for September are expected to head lower from 0.6% to 0.3%. The Control Group number was previously at 0.1% with no expectation foreseen this time around. Retail Sales ex Autos is heading from 0.6% to 0.2%.
• At 12:55 GMT, the Redbook Index is due to come out for the week of October 13. Previous reading was 4%.
• Around 13:15 GMT, the monthly Industrial Production release for September is due. Expectations are for the print to head from 0.4% to 0%.
• Expect some headlines from Michelle Bowman, a governor on the Federal Reserve’s board, around 13:20 GMT.
• Another two numbers due to come out near 14:00 GMT: US Business Inventories for August, expected to head from 0.% to 0.3%. Additionally, the National Association of Home Builders (NAHB) is due to print the monthly Housing Market Index for October, which is expected to head from 45 to 44.
• Around 14:45 GMT, some headlines are expected from Thomas Barkin from the Federal Reserve Bank of Richmond.
• Equities are very much mixed with European and US equities on the back foot, while Asian equities advancenear 1%. 
• The CME Group’s FedWatch Tool shows that markets are pricing in a 90.1% chance that the Federal Reserve will keep interest rates unchanged at its meeting in November. 
• The benchmark 10-year US Treasury yield soared to 4.75% and is ticking up further as the bond sell-off continues.  

US Dollar Index technical analysis: Awaiting to choose sides

The US Dollar looks to have reached the end of the line of its relentless rally since July. It comes as no surprise that the price action is cooling down and that the US Dollar Index (DXY) has retreated from its peak. With the DXY in the middle of this month’s range, the outcome will depend on three things: the rate differential of US yields against other currencies, the risk sentiment driven by geopolitical headlines and Powell’s speech on Thursday. 

A bounce above the daily trendline from July 18 might still materialize. On the topside, 107.19 is important to reach. If this is the case, 109.30 is the next level to watch. 

On the downside, the recent resistance at 105.88 did not do a good job supporting any downturn. Instead, look for 105.12 to keep the DXY above 105.00. If that does not do the trick, 104.33 will be the best level to look for some resurgence in US Dollar strength with the 55-day Simple Moving Average (SMA) as a support level.