- The DXY loses stability and falls back to the 93.50 / 45 area.
- Risk appetite, and the stability of US yields weigh on the dollar.
The US Dollar Index (DXY), which measures the dollar against a set of its main competitors, accelerates the decline and challenges the October lows near 93.50.
The US Dollar Index Supported Near 93.50
The index extends the bearish tone in the second half of the week and looks ready to challenge the decent containment area at the 93.50 zone, where the monthly lows are located.
The dollar fell further due to continued activity in the US cash markets, where the flattening of the yield curve is holding up well. In fact, returns at the front of the curve topped the 0.56% level for the first time since March 2020, while longer-term returns manage to marginally rebound from recent lows.
Additionally, preliminary US GDP figures showed that the economy is forecast to expand at 2.0% QoQ in the third quarter versus expectations for a 2.7% expansion. In brighter tone, weekly claims beat estimates with an increase of 281,000 in the week through October 23.
Further weakness of the dollar produced the firmer tone of the euro after the ECB event.
Technical levels
Now, the index is losing 0.40% at 93.48 and a break above 94.17 (weekly high on Oct 18) would open the door to 94.56 (2021 high on Oct 12) and then 94.74 (monthly high on Oct. September 25, 2020). On the other hand, the next bearish barrier emerges at 93.48 (monthly low on October 28) followed by 93.31 (55-day SMA) and finally 92.98 (weekly low on September 23).
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