DXY inter-markets: well supported at 94.00

The US Dollar Index, which tracks the buck vs. its major rivals, has found some relief in the 94.00 neighbourhood today. In fact, auspicious results from the US docket – mainly from the industrial sector - seem to have lured buyers in along with hawkish-ish comments by NY Fed W.Dudley, saying a rate hike in September is (still) ‘possible’ and that Fed Funds Futures prices are underpricing rate hikes.

The current rebound in USD is being sustained by US yields not only reverting the initial drop but also trading in daily highs, along with a pick up in volatility (tracked by VIX) and a bounce from the Fed Funds Futures prices. According to CME Group’s FedWatch tool (and excluding Dudley’s comments), the probability of a rate hike in September hovers over 10%, while higher rates in December are seen with a probability of just above 37%.

In the meantime, today’s decline of DXY stalled in the boundaries of the support line off YTD low at 91.88 (May 3), currently located at 94.28. While further pullbacks should not be ruled out – exclusively driven by RO-RO trends - today’s comments by the ‘neutral’ Dudley, positive results from the industrial sector, Core CPI staying above the Fed’s mandate for nine straight months so far and a potential cautious-to-hawkish tone from the FOMC minutes on Wednesday, could lend the buck some much needed oxygen in the next trading hours.