• The US dollar is in the green at the beginning of the US trading session.
• European PMI indices collapsed in September, while US ones remain flat for now.
• The US dollar index is rising and trying to regain the 101.00 level.

The US dollar (USD) is poised to maintain its gains early Monday during European trading hours. The greenback saw significant inflows after traders fled the euro, which was punished by sharply weaker Purchase Manager Index (PMI) data from Germany and France. US PMIs look resilient, even slightly exceeding expectations for the services sector.

In terms of economic data, comparisons have been made between the services and manufacturing sectors in Europe, the UK and the US. Europe is lagging behind, with both sectors in deeper recessions or at least on the verge of falling into one. PMIs in the UK and the US are ahead of the Europeans, resulting in a punished euro and a positive US dollar.

Daily Market Factors Review: Europe’s Gloomy

• US S&P Global PMI preliminary indices for September published:
  • The services figure was 55.4, higher than the expected 55.2 but slightly lower than the previous 55.7.
  • The manufacturing sector reading was 47, lower than the expected 48.5 and lower than the previous reading of 47.9.
  • The total was 54.4 compared to 54.6 previously.
• Speakers from the US Federal Reserve are set to share their comments on the current stance on monetary policy:
  • At 12:00 GMT, Federal Reserve Bank of Atlanta President Raphael Bostic delivered a virtual speech on the U.S. economic outlook at a Distinguished Speakers Seminar convened by the European Economics and Financial Centre at the University of London. Bostic reiterated his support for a 50 basis point rate cut, but did not confirm the size of a future move.
  • At approximately 14:15 GMT, Federal Reserve Bank of Chicago President Austan Goolsbee delivers a speech on monetary policy and the U.S. economy at the annual meeting of the National Association of State Treasurers in Chicago.
  • At approximately 17:00 GMT, Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, participates in a question-and-answer session hosted by the Greater Kansas City Chamber of Commerce at the Minnesota Science Museum.
• Stock markets are starting to turn green on the assumption that in Europe, the European Central Bank (ECB) will have to cut more and become more dovish to support growth. This is seen as positive for stocks. European stocks are up less than 0.50% on the day, while US stocks are also in the green.
• The CME Fedwatch tool indicates that the probability of a 25 basis point rate cut at the next Federal Reserve meeting on November 7 is 50.6%, while the probability of another 50 basis point rate cut is 49.4%.
• The US 10-year benchmark rate is at 3.78, reaching a novel two-week high.

US Dollar Index Technical Analysis: Data-Driven Moves

The US Dollar Index (DXY) seemed unable to move higher last week when the Fed pulled the trigger and cut rates by 50 basis points. The greenback could be the baby of the comeback this week, and the PMI releases on Monday are likely to paint a very different picture for traders to consider. European results could be significantly weaker than those in the US, meaning the US dollar deserves a boost (appreciation) to the levels it traded at last week.

The top of the September range remains at 101.90. Further up, the index could reach 103.18, with the 55-day plain moving average (SMA) at 102.59. The next tranche up is very hazy, with the 100-day SMA at 103.71 and the 200-day SMA at 103.78, just before the large round level at 104.00.

On the downside, 100.62 (December 28, 2023 low) is the first support that could indicate further weakness. If that happens, the next level to watch is the July 14, 2023 low at 99.58. If that level gives way, early 2023 levels would be around 97.73.

US Dollar Index: Daily Chart