DXY inter-markets: looking to extend the rally

The US Dollar index, which gauges the greenback vs. its main competitors, is prolonging its upside momentum beyond the 97.00 handle today, or fresh 4-month highs, after leaving behind the strong resistance area around 96.80.

The move has been partially sustained by positive results from US Retail Sales (last Friday) and today’s better-than-expected data from the US housing sector.

US money markets are showing yields in the positive territory in the shorter end of curve, while the red predominates in the longer term. Volatility measured by VIX is navigating the lower bound of the range, decoupling the USD up-move from a pick up in the risk aversion sentiment.

In addition, and also in response to recent data, market chatter has revived the idea of a rate hike by the Fed at some point in the next months, especially since the stellar print from June’s Non-farm Payrolls (287K). According to Fed Fund future prices tracked by CME Group’s FedWatch tool, the probability of a rate hike in September is around 13%, just above 14% in November and nearly 40% in December. Future results in the US docket as well as comments by FOMC governors could probe to be crucial for aspirations of higher rates in the medium term.

In the meantime, there is not much in terms of significant resistance levels until 98.59 (high March 2) previous to YTD tops at 99.95 (January 21).