AI Funding Concerns Linger

The US Dollar remains weak today as focus stays with weakened near-term Fed tightening expectations ahead of the FOMC next week. Despite hotter-than-forecast US inflation last week the recent rout in AI stocks and accompany stock market plunge has spooked investors and saw rate hike pricing for this month plunging sub 10%. Despite this, pricing for a hike in December remains above the 90% level. Clearly, with hawkish year end expectations still intact, current focus is on the AI situation. With that in mind, traders will be closely watching tomorrow’s Meta, IBM and Tesla Q3 earnings reports. In particular traders will be monitoring changes in debt levels given the recent funding concerns which rocked markets last week. If any weaknesses are spotted in these big names, the downside impact on both stocks and USD could be sizeable, potentially weakening December tightening forecasts.

Fed Expectations

With little on the US data sheet this week expect PMI readings and some UoM data on Friday, the AI story should continue to drive USD action in coming days. If tomorrow’s tech earnings come out on the strong side, this should help assuage AI funding fears leading to a rebound in stock prices and, subsequently, USD. While next week’s FOMC expectations are unlikely to be improved even in the event of bumper reports tomorrow, the main focus for USD bulls is that December tightening pricing stays at elevated levels.

Technical Views

DXY

For now, the index continues to hold support at the 101.91 level following the correction lower from around the 103 level. While this marker holds as support, focus is on a fresh push higher with the 103.20 level the next target for bulls. If we break lower, trend line retests should offer support ahead of the deeper 100 structural level.