Dollar index remains under pressure and bounces away from lows near 105.30

• The index seems to have found some initial containment near 105.30.
• US yields continue to sail into negative territory on Tuesday.
• US Producer Prices rose less than expected in October.

The dollar index (DXY)which tracks the dollar against a basket of its main rivals, resumes the intense leg lower and retests the 105.30 area on Tuesday.

DXY bounces off 3-month lows

The index quickly puts aside Monday’s bullish attempt and resumes the downtrend at Tuesday’s change, briefly revisiting the 105.30 region for the first time since mid-August, before rallying afterwards.

Also helping the dollar fall is another negative session in US yields across the curve, amid relentless repricing of the Fed’s policy pivot.

Additional pessimism in the dollar came after US Producer Prices rose less than expected, up 0.2%m/m in October and 8% in the last twelve months, supporting the view of that inflation has lost some traction lately.

Additionally, the New York Empire State Manufacturing Index improved to 4.5 in November (from -9.1).

What to keep in mind around the dollar

The index remains under strong pressure, always stemming from the probability of a slower rate path in the coming months by the Fed and its positive impact on the universe associated with risk.

Meanwhile, investor repricing of a likely Fed policy pivot now emerges as a fairly reliable new source of dollar weakness, in line with a corrective decline in US yields across the curve.

Relevant USD Index Levels

Now, the index is back 0.82% to 106.06 and a break of 105.34 (15 Nov monthly low) would open the door to 104.89 (200-day SMA) and finally 104.63 (10 Aug monthly low). On the other hand, the next bullish barrier sits at 109.10 (100-day SMA), followed by 110.91 (55-day SMA), and then 113.14 (3 November monthly high).