US Dollar rises ahead of Tuesday presidential debate

• US Dollar is rising ahead of the presidential debate, continuing its strength despite ongoing dovish Fed easing expectations.
• Outcome of tonight’s debate between Vice President Harris and former President Trump might shake the USD’s ground.
• Dovish bets on the Fed might limit the USD’s upside.

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 debate outcome, with analysts expecting volatility in currency markets depending on the perceived winner. Market focus is set on Wednesday’s Consumer Price Index (CPI) inflation figures.

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

Daily digest market movers: US Dollar firm on quiet Tuesday ahead of CPI figures despite steady dovish bets

• US Dollar continues to rise despite expectations of continued easing by the Fed.
• Traders are currently pricing in nearly 125 bps of easing by year-end, suggesting 50 bps cuts at the November and December meetings.
• Market also sees 225 bps of easing over the next 12 months.
• US presidential debate will be held Tuesday night and could provide more insights on how financial markets would perform under a Trump or Harris presidency.
• Perceived debate winner might set the pace of the Greenback’s dynamics. In addition, CPI figures on Wednesday will also be important.

DXY technical outlook:  DXY sentiment slightly improves, indicator shift suggests momentum uptrend

Technical analysis for the 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 shift in momentum. The DXY index recently reclaimed the 20-day Simple Moving Average (SMA) near 101.60, providing support to the short-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.