Dollar Index dull, parked below 95.00 handle
Dollar Index is going nowhere this Monday morning in Asia as the weakness in the treasury yields despite upbeat Q3 GDP reading is keeping the bulls at the bay.
Yield curve flattens
The spread or the difference between the US 10-year yield and the US 2-year yield continues to form lower highs on the daily chart. The spread currently stands at 80.7 basis points vs. Oct. 25 high of 83.7 bps. The narrowing/flattening of the yield curve is USD negative.
Downside capped by Catalan crisis?
The EUR/USD could remain on the back foot, courtesy of Catalan crisis, thus the downside in the DXY could be limited, given the Euro-Dollar pair has the highest weight in the dollar index basket.
Focus on US Core PCE
The Fed’s preferred measure of inflation – the core personal consumption expenditure (ps) – is scheduled for release at 12:30 GMT. An uptick in the core PCE could be considered as an evidence that a rise in China’s factory-gate prices (PPI) is pushing inflation higher in the US. A better-than-expected data could result in a steeper yield curve and a strong US dollar.
Dollar Index Technical Levels
The index was last seen trading around 84.80. A break below 94.27 (Oct. 6 high) would open doors for 93.99 (100-DMA) and 93.80 (Oct. 18 high). On the higher side, breach of resistance at 95.15 (previous day’s high) would expose 95.47 (Jun. 30 low) and 96.00 (zero levels).
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