US Dollar Index (DXY): Bears Control Sentiment Just Above 106.00

• The index manages to bounce away from lows near 105.80.
• Retail sales grew more than expected in October.
• Industrial Production disappointed the consensus last month.

After an earlier drop to the 105.80 zone, the US dollar index (DXY) it rallied and broke above the 106.00 level again on Wednesday.

USD Index Rebounds on Positive Data

Despite the rebound from the lows, the index remains entrenched in negative territory amid persistent investor reappraisal of the Federal Reserve’s next steps on future interest rate hikes.

For now, market participants continue to favor a 50 basis point rate hike at the December 14 meeting, according to the FedWatch tool, calibrated by CME Group.

In the US data realm, MBA mortgage applications rose 2.7% in the week to November 11, while Retail Sales rose 1.3% in October from the prior month and Industrial Production unexpectedly contracted. 0.1% mom also in October.

Later in the session, the NAHB index, business inventories and TIC flows will close out the daily economic calendar.

In addition, the New York Fed’s J. Williams (permanent voter, centrist) and the FOMC’s C. Waller (permanent voter, dove) will also speak along with other testimony from the FOMC’s S. Barr.

What to keep in mind around the dollar

Price action around the dollar remains depressed and relegates the index to navigate the lows around the 106.00 zone.

In the meantime, the dollar is expected to remain under the microscope amid persistent repricing by investors of a likely slowing of the Fed’s rate path in the coming months.

Relevant USD Index Levels

Now, the index is back 0.41% to 106.13 and a break of 104.34 (15 Nov monthly low) would open the door to 104.94 (200-day SMA) and finally 104.63 (10 Aug monthly low). On the other hand, the next bullish barrier sits at 109.11 (100-day SMA), followed by 110.87 (55-day SMA), and then 113.14 (3 November monthly high).