US Dollar loses momentum ahead of 92, looks to close week slightly higher

After edging lower to a fresh 5-day low at 92.60, the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, gained traction during the second half of the NA session and inched higher towards the 92 mark. As of writing, the index was at 91.90, still losing 0.15% on the day.

Earlier in the session, the data from the U.S. revealed a 0.2% decline in monthly retail sales in August. Moreover, industrial production came in at -0.9 for the same period, missing the market consensus of 0.4%. However, the sharp retreat in industrial production was due to temporary factors as the report released by the Fed said, "Hurricane Harvey is estimated to have reduced the rate of change in total output by roughly 3/4 percentage point. The manufacturing industries with the largest estimated storm-related effects were petroleum refining, organic chemicals, and plastics materials and resins."

Although the index is headed for a second straight daily close with losses, it remains in the positive territory for the week. However, this week's modest rise doesn't suggest the beginning of a deeper recovery. In fact, investors are likely to refrain from taking large positions ahead of next week's critical FOMC meeting, which will include an updated economic forecast report. 

"We would not be surprised to see the median forecast to show that the Fed now feels three hikes is the most likely scenario, reflecting the more subdued inflationary environment than anticipated and some near-term uncertainty on growth, as a result of the recent hurricanes," ING economists wrote in a recent report.

Technical levels to consider:

92 (psychological level) remains as the first hurdle for the index ahead of 92.70 (Sep. 5 high) and 93.30 (Aug. 31 high). On the downside, supports could be seen at 91.40 (Sep. 7 low), 91 (Sep.8 low) and 90 (psychological level). 

Today's data from the U.S.:

• US: Retail sales for Aug 2017 were $474.8 bln, a decrease of 0.2% from July
• US: Industrial production declined 0.9% in Aug following six consecutive monthly gains
• US: Consumer confidence edged downward in early September - UoM
• US: Manufacturers’ and trade inventories were at $1,873.9 bln, up 0.2% from June