The US dollar rises ahead of Tuesday’s presidential debate

• The US dollar is rising ahead of the presidential debate, continuing its strength despite expectations of an easing of Fed expectations.
• The outcome of tonight’s debate between Vice President Harris and former President Trump could shake the ground for the USD.
• Dovish bets on the Fed could limit USD gains.

The US dollar index, a measure of the USD’s value against six other currencies, is firm ahead of tonight’s presidential debate. Markets are likely to react to the outcome of the debate, with analysts expecting volatility in currency markets depending on the perceived winner. Market focus is on Wednesday’s Consumer Price Index (CPI) inflation figures.

Despite the positive economic indicators, the market may be exaggerating its expectations for aggressive monetary policy easing. The current rate of growth is outpacing the long-term trend, signaling that markets may be overestimating the need for such measures. However, a 25bps discount would appear to be a done deal.

Daily Market Reasons: US dollar firm quiet on Tuesday ahead of CPI numbers despite steady bets.

• The US dollar continues to rise despite expectations of continued Fed easing.
• Traders are currently pricing in nearly 125 bps of easing by the end of the year, suggesting cuts of 50 bps at the November and December meetings.
• The market also sees 225 bps of easing over the next 12 months.
• The US presidential debate will take place on Tuesday night and could provide more insight into how financial markets would behave under a Trump or Harris presidency.
• The perceived winner of the debate could set the pace for the greenback’s momentum. In addition, Wednesday’s CPI numbers will also be important.

DXY Technical Outlook: DXY sentiment is improving slightly, indicator change suggests an uptrend in momentum

Technical analysis for DXY indicates a slight improvement in sentiment. Indicators, including the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD), are still in negative territory but recovering, suggesting a potential change in momentum. The DXY recently recovered the 20-day simple moving average (SMA) near 101.60, providing support to the near-term outlook.

To maintain this uptrend, buyers must continue to hold above this level. Key support levels to watch include 101.60, 101.30 and 101.00, while resistance levels lie at 101.80, 102.00 and 102.30.