US Dollar: forecast for October 26-30
Last week the US dollar has recovered some ground after the ECB meeting on Thursday. Dovish Mario Draghi’s comments pushed the US Dollar index to the resistance of the “autumn” sideways channel at 96.50. It is too early to predict a longer term recovery, though. Break above 97 points is needed to confirm the bullish reversal.
Economic calendar for the new week is full of important releases. The Fed will announce its interest rate decision on Wednesday, while on Thursday we’ll watch the Q3 GDP. PCE index and employment cost index are to be released on Friday.
We do not expect these macro data to change the flat trend in USD. According to the futures market, the chance for a rate hike in October is less than 6%. Press conference will be organized only if a policy change takes place. Q3 GBP is forecasted to slow down from 3.9% to about 1.5% on the back of the weaker external demand for the US goods. The major bullish risk for the greenback this week is the quarterly Employment Cost Index. A recovery from a record low of 0.2% would be an upbeat signal for the Fed in December.
Chart. USD Index Daily