DXY inter-markets: dips remain shallow

The US Dollar Index is now accelerating the downside after market participants continue to digest the mixed results from the US labour market during November, where the economy created around 180K jobs, the jobless rate ticked lower but expectations of higher inflation wages were slashed after Average Hourly Earnings unexpectedly contracted on a monthly basis.

Although today’s results might be not enough to keep fuelling the recent rally in USD in the very near term, they equally do not seem enough to undermine the underlying constructive outlook of the buck for the next months and they certainly do not affect the solid health of the US economy. However, the poor prints from inflation wages could prompt Chair Yellen to wonder whether the uptrend in wages is not running out of steam, and this could cast some shadows over the near term prospect of USD.

DXY remains well underpinned by the recent performance of US money markets, where the spread between the US 10-year benchmark and its G10 peers continues to widen.

Additionally, the case for a looser fiscal policy under a Trump administration remains well on the cards, sustaining prospects of higher inflation.

Technically, the index should find decent support in the 100.70/60 band, the lower end of the so far consolidative theme sparked last week, while the longer term constructive bias stays intact while above the 7-month support line, currently in the 96.10 area. This level is reinforced by the key 200-day sma at 96.15.