The US Dollar (USD) is facing questions from traders and investors as recent reports reveal that yields have been partially going up because of massive selloffs in bond holdings from China and Japan. Meanwhile the visit from US President Joe Biden in Israel has not played out as the White House wanted to, with an in person meeting with the Jordan Crown Prince Abdullah II bin Al-Hussein cancelled just hours before the US President touched ground in Tel Aviv. Add to that, the rate differential on the US-side going rouge, not for good reasons: China and Japan have sold billions of US holdings in September, and the Greenback is losing a little its status as king.
On the data front, traders will focus on the US Federal Reserve (Fed) Chairman Jerome Powell comments at his speech in the New York Economic Club. Where last week a few Fed members suggested the central bank is done hiking, some hawkish comments on Thursday show no unanimity on the current stance from the board, which means that Powell will likely refrain from making bold statements and will leave traders clueless. The US Dollar is entering the twilight zone where it might start to hurt. The US Dollar Index (DXY) is starting to float, not really breaking out in any upside or downside sense. The fact that the US 10-year rates are starting to hit 5% is a sign on the wall, as often 5% accounts as a psychological barrier where an economy might start to struggle to meet up with its funding needs.
A bounce above the daily trendline from July 18 might still materialise, although this level is starting to slip further away. On the topside, 107.19 is an important level to reach. If this is the case, 109.30 is the next level to watch. On the downside, the recent resistance at 105.88 did not do a good job supporting any downturn. Instead, look for 105.12 to keep the DXY above 105.00. If that fails to do the trick, 104.33 will be the best level to look for resurgence in US Dollar strength, with the 55-day Simple Moving Average (SMA) as a support level.