US Dollar prints eleventh straight weekly gain ahead of US government shutdown on Sunday

Share:

• Markets are digesting the recent PCE numbers. 
• Chicago PMI number deteriorates further.
• The US Dollar Index clings on to an 11th weekly positive close.

The US Dollar (USD) is trying to hold on to another weekly gain, though it looks like either a make-or-break deal. If the US Dollar holds onto gains, this would be the 11th consecutive weekly gain for the US Dollar Index (DXY). 

While the US Dollar Index closed each week near the high of that same week, that does not look to be the case for this week. With the United Auto Workers (UAW) union strikes continuing, more independent workers joining the picket lines and a US federal government shutdown expected to start this weekend, things are starting to look grim for the Greenback.

No the expect oil-on-the-fire from the Federal Reserve (Fed) preferred inflation gauge: the Procuder Price Index. Nearly every number fell in line of expectations, making it a snooze fest in the markets. The Chicago Purchase Manager’s Index (PMI) deteriorated further and could mean issues ahead of future PMI numbers. 

Daily digest: US Dollar lacks fuel

• The Personal Consumption Expenditures (PCE) Index came in, in line of expectations: Overall yearly component whent from 3.4% to 3.5%. The monthly measure from 0.2%to 0.4%. The Core PCE yearly component from 4.3% to 3.9%. The monthly core PCE from 0.2% to 0.1%. Again energy was the main driver for a higher overall component against a lower core. 
• Additionally, traders saw Personal Income ticking up from 0.2% to 0.4%, in lin eof expectations. Personal Spending went from 0.9% to 0.4%, as well in line. 
• Tthe Chicago Purchasing Managers Index (PMI) for September dropped below estimates to 44.1 from 48.7.
• University of Michigan final readings saw Sentiment tick up from 67.7 to 68.1. The inflation expectation fell in line from 2.7 to 2.8%. 
• Equities are mixed with Hong Kong’s Hang Seng Index roaring over 3%, while in Japan the Nikkei and the Topix are down for this Friday at their closing bell. The Nikkei is even trading near a one-month low. In Europe equities are set to close in the green with US equity futures seeing Nasdaq leading the charge. 
• The CME Group FedWatch Tool shows that markets are pricing in an 82.7 % chance that the Federal Reserve will keep interest rates unchanged at its meeting in November. 
• The benchmark 10-year US Treasury yield trades are lower at 4.52%, which is quite a step away from 4.68% earlier this week. Investors are starting to buy bonds in order to safely park funds over the weekend with the government shutdown at hand. 

US Dollar Index technical analysis: locked and loaded

The US Dollar tries to cling on to gains as this week might be proven pivotal for its winning streak since the summer. The US Dollar Index is set to print its 11th straight weekly gain, though headwinds are building up. With the UAW strike, the US Government shutdown and GDP miss are signs not to be ignored with possibly a firm unwind of the current Dollar bull positions that have been built up.  

The US Dollar Index opened around 106.15, though the overheated Relative Strength Index (RSI) starts to ease and is out of the overbought area. Traders that want to hit a new 52-week high need to be aware that a lot of road needs to be covered toward 114.78. Rather look for 107.19, the high of November 30, 2022,  as the next profit target on the upside. 

On the downside, the recent resistance at 105.88 should be seen as first support. Still, that barrier has just been broken to the upside, so it isn’t likely to be strong. Instead, look for 105.12 to do the trick and keep the DXY above 105.00.