Categories: Forex News
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2023-10-31 9:17 AM

US Dollar Climbs Ahead of Key Data: What’s Next?

  • The US Dollar Index (DXY) rises, reaching the 106.40 mark ahead of European market's opening.
  • Speculation grows that the Federal Reserve will maintain its current interest rates in their upcoming Wednesday meeting.
  • Significant US economic data releases are on the horizon, including the Employment Cost Index, FHFA House Price Index, and Consumer Confidence data.
By Nonhlanhla

Johannesburg – The US Dollar Index (DXY) has recently seen a resurgence, climbing to the 106.40 region prior to the opening bell in European markets this Tuesday. This upward movement, particularly relevant for South African investors and traders monitoring international currency trends, is worth noting amid the backdrop of various global and US-centric events.

Key Highlights on the US Dollar Index

Positive Momentum in DXY: After experiencing two consecutive daily pullbacks, the USD Index is back in the limelight, revisiting the 106.40 mark. This revival is driven in part by shifting risk dynamics and emerging market sentiments on what traders often label as ‘turnaround Tuesday’.

Federal Reserve’s Anticipated Stance: The recent uptick in the USD Index coincides with a marginal drop in US yields across various maturities. There’s rising speculation in the market that the Federal Reserve will maintain its current interest rates in the forthcoming meeting set for Wednesday.

Upcoming Key Data Releases: Investors should gear up for several significant US economic data releases. These include the Employment Cost Index, the FHFA House Price Index, and the critical Consumer Confidence data, as measured by the Conference Board.

Underlying Factors Influencing the USD’s Performance:

The recent correction in the USD Index seems to have encountered substantial resistance just above the 106.00 mark earlier this week.

Continued support for the US dollar arises from the robust health of the US economy, coupled with persistent inflationary pressures. This economic landscape translates into heightened yields and reinforces the Federal Reserve’s stance of maintaining a tighter monetary policy for a more extended period.

Major events to watch this week for US data include:

  • Employment Cost, FHFA House Price Index, CB Consumer Confidence (Tuesday)
  • MBA Mortgage Applications, ADP Report, Final Manufacturing PMI, ISM Manufacturing, Construction Spending, FOMC Interest Rate Decision, Powell’s press briefing (Wednesday)
  • Initial Jobless Claims, Factory Orders (Thursday)
  • Nonfarm Payrolls, Unemployment Rate, Services PMI, ISM Services PMI (Friday).
  • Current discussions dominating the financial world focus on whether the US economy will undergo a soft or hard landing. Added to this is the ongoing speculation regarding potential rate cuts towards the end of 2024, geopolitical tensions involving Russia and China, and the growing concerns about the Middle East crisis impacting other global regions.

USD Index: Critical Levels to Watch

The index currently stands at a 0.20% increase, positioned at 106.35. Should it surpass the 106.88 mark (recorded as a weekly high on October 26), it might aim for the 107.34 level (2023’s peak on October 3) and possibly even reach the 107.99 threshold (noted as a weekly zenith on November 21, 2022). Conversely, the downside may see support at 105.36 (monthly low of October 24), followed by 104.42 (a weekly low on September 11) and then potentially drop to 103.43 (aligned with the 200-day SMA).

For South African investors and businesses involved in trade or investment activities with US counterparts, staying updated with these global currency shifts is crucial. A strengthening USD can influence trade dynamics, investment decisions, and the broader economic landscape.

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Nonhlanhla P Dube is a senior news reporter. Nonhlanhla is a student of International Relations at the University of South Africa. She reports primarily on personal finance and economics. You can contact her on: Email: