DXY inter-markets: scope for further downside

The greenback continues to suffer the increasing downside pressure that emerged after the rejection from July tops in the 97.60 region, testing fresh 2-month lows around 94.40 and eroding at the same time the key support trendline off 2016 low at 91.88 recorded in early May.

Yesterday’s FOMC minutes have matched prior estimates pointing to a dovish tone after the Committee reinforced its ‘wait-and-see’ stance and showed no clues regarding the probable timing of the next rate hike by the Fed. Adding to USD weakness, Fed Fund futures prices are heading down for the time being, while US yields are bouncing off daily lows, somewhat limiting (or slowing the pace of) the ongoing retracement.

Looking ahead, the pullback in DXY could extend to the 93.00 neighbourhood (June’s low), opening the door for another test of 2016 trough at 91.88 posted on May 3.