DXY inter-markets: door open for 102.00?

The US Dollar Index, which gauges the buck against a basket of its major rivals, is navigating the area of yearly tops in the mid-100.00s, trading at shouting distance from multi-year peaks seen in December 2015 at 100.60.

Firmer expectations of a rate hike by the Federal Reserve in December remains the almost exclusive source of buying interest around USD, although the likeliness of extra fiscal stimulus to be pumped during Trump’s administration and rising yields in the US money markets have been also collaborating with the dollar’s upside.

In the same direction, CME Group’s FedWatch tool now sees the probability of a rate hike by end 2016 at 90.6% based on Fed Funds futures prices.

All the roads keep pointing to further tightening by the Fed in the next month, building the case for a stronger greenback, at least on the run up to the meeting. Adding to that view, the labour market remains healthy with only one more report to go before the FOMC meeting next month, while inflation figures remain on the upside, recently backed by rising inflation expectations following potential measures to be announced by Trump.

Regarding FX, there is no significant resistance levels until the 102.20/70 region, monthly tops seen in April and March 2003. On the other hand, the initial support emerges at 99.13, Friday’s top and lower bound of the opening gap seen on Monday. Furthermore, the constructive stance appears unchanged while above the 95.90 area, where coincides the 200-day sma and the 6-month support line.

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