DXY inter-markets: USD exposed to further pullbacks

The US Dollar Index, which gauges the buck vs. its main competitors, has eroded yesterday’s gains and is now accelerating its downside to the 95.20 area in response to miserable prints from July’s Retail Sales.

In a week where the lack of direction in the global markets was a constant, USD needed a strong reading today to not only sustain further its recovery but also to remove the uncertainty regarding a potential rate hike by the Fed in the next months: it failed. Retail Sales have disappointed and a pause in the Fed’s tightening cycle seems more likely.

US yields have plummeted in the wake of the results, same as Fed Funds futures prices, which according to CME Group’s FedWatch tool the probability of a rate hike next month is at 12% and a December move is nearly 45%, although those readings are likely to be revised lower in the next hours.

In case the selling pressure picks up pace, the next support should emerge just below the 95.00 mark (early August lows) followed by the 94.20 region, where sits the uptrend line off YTD low at 93.03 posted on May 3.