September hike still expected from US Fed

DXY swung around in August, ending the month little changed but with a 6% high to low range. In short-term, it all comes down to the timing of the first hike even if the much more important question is the path of policy normalisation. 

"Following another decent payrolls report in early September (weaker on the headline but with positive revisions and strong earnings growth), markets are now priced for ~35-40% chance of a hike on Sept 17. That rises to ~60% for October and ~80% by year end. In practice there should be more certainty ahead of Sept 17", says RBC capital markets. 

It is uncomfortable for the Fed to hike for the first time in nine years when the market is highly uncertain. So if some stability is seen in risk assets and they are ready to pull the trigger, FOMC officials will start dropping hints ahead of the meeting itself. 

"A hike is still expected in September (and if not September, we think October is a strong expectation). That should drive short-term gains for USD (target 1.07 EUR/USD; 126 USD/JPY). Technically DXY has formed a double bottom at 93.14 amidst a broad multi-month price consolidation", added RBC. 

Support at 95.21/93.14 should attract buying interest for a test of resistance at 97.96. A daily close above there would then target 100.24/100.91.