DXY inter-markets: buy the dips?

The US Dollar Index – which tracks the buck against a basket of its main rivals – is retreating for the second session in a row today, coming down from yesterday’s fresh multi-month tops in levels just above the 99.00 limestone to the current mid-98.00s.

As being the case in the last months, increasing expectations of a Fed’s rate hike in December continue to drive the upbeat sentiment around the buck. According to CME Group’s FedWatch tool, the probability of higher rates by end of 2016 is currently at 72%, based on Fed Fund futures prices.

Yields in US money markets are trading on a positive fashion across the curve, alleviating somewhat the renewed selling pressure around USD, while DXY remains entrenched in the negative territory around 98.50 for the time being.

On the positioning front, via the latest CFTC report, USD speculative net longs have climbed to the highest level since December 2015 during the week ended on October 18, when the DXY was trading around 98.30.

In the meantime, the bullish stance around the dollar remains intact while above the support line off 2016 lows, currently near 95.60. The next relevant up barrier aligns at yesterday’s tops at 99.09, followed by 2016 highs just below the 100.00 handle recorded in January.