DXY inter-markets: support emerged at 97.00

The US Dollar Index – which gauges the buck against a basket of its main rivals – seems to have found decent support around the 97.00 neighbourhood for the time being. In fact, after retreating for three sessions in a row, buyers appeared around the 97.00 handle to drive the index back to the 97.40 area, although the weekly balance still remains negative.

However, there is still room for further recovery if tomorrow’s Non-farm Payrolls come in at a healthy figure, as consensus expects the economy to have created 175K jobs during last month. A positive result will reinforce even further the view of a Fed’s rate hike next month, as the FOMC has decided to wait for more evidence before making that move, according to yesterday’s meeting.

Yields in the US money markets are trading in a mixed fashion so far today, showing red figures in the shorter end of the curve and some gains as we move up. The 2-year, 5-year and 10-year benchmarks are off daily lows albeit keeping the lower bound of the weekly range nonetheless, accompanying the downside in the buck. Fed Fund futures prices are testing the area of session troughs, although CME Group’s FedWatch tool still places the probability of a rate hike above 70% by year-end.

In the meantime, as long as the 6-month support line underpins - today at 95.60 – the outlook on the index should remain constructive, with no relevant resistance levels until last week’s 9-month tops just above 99.00 the figure. The risks to this view comes from the current effervescence in the US politics, although latest elections polls have showed H.Clinton remains on the lead by 3-4 points, all giving some relief to USD.

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