A decrease of 1.8 percent US dollar index (DXY) last week was the biggest since the second week of July. Economists at Société Générale analyze the outlook for Greenback.
DXY threatens a deeper retracement towards 102.55
A close below the 200-DMA (103.62) put DXY at risk of a deeper retracement to 102.55.
In the most bearish tactical scenario, a decline to 100 could follow if real yields continue to fall to 2% and the nominal 10-year UST breaks below 4.36%/4.33%. However, the dollar is now near oversold levels and a recovery could be delayed.
The question is whether a recovery in oil prices (extension of Saudi/OPEC+ production cuts) would negate confidence in a soft landing in the US economy and speculation of a first rate cut in 1H24, which explains the dollar’s profit-taking.
