US Dollar (USD) Price Outlook: DXY Breaking Lower as Risk Sentiment Improves

USD price, news and analysis:

• The safe haven US Dollar is suffering from a rise in global risk appetite that is benefiting pairs such as GBP/USD, AUD/USD and NZD/USD.
• That’s despite US inflation pressures building and consequent suggestions that the Fed will begin to taper its asset purchases next month ahead of an interest rate increase next year.

USD under downward pressure

The US Dollar looks to be sliding lower against a batch of other currencies as investors shun safe havens and opt instead for so-called risk currencies such as the Australian and New Zealand Dollars and the British Pound.

That has already weakened the US Dollar Basket to its lowest level since September 28 and two downside levels to look out for now are the 92.96 low touched on September 23 and the significant low at 91.94 reached on September 3.

US Dollar Basket Price Chart, Two-Hour Timeframe (September 2 – October 19, 2021)

Source: IG (You can click on it for a larger image)

This USD weakness has come despite growing signals that US inflation will not, after all, be transitory and that the Federal Reserve will respond to inflation pressures building by first tapering its asset purchases and then increasing its target from the current 0.00-0.25%.

That tapering could come a soon as next month, although a rate increase of 25 basis points is not expected by the markets until September next year. That makes sense as the US economy looks to be still quite week judging by data such as yesterday’s number for industrial production in September that showed a 1.3% drop month/month.

— Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex