The U.S. dollar index (DXY) surged 1.45% to 96.44 on Thursday after European Central Bank (ECB) President Mario Draghi said in the press conference after the ECB Governing Council meeting in Malta that the bank will re-examine whether to extend its 1.1 trillion euro bond-buying program at its December 3 meeting. "The asset-purchase plans are proceeding smoothly and continue to have a favorable impact," said Mr. Draghi. The ECB left key interest rates unchanged at 0.05%.

Mr. Draghi sees downside risks to growth and the inflation outlook. The Federal Statistical Office said earlier this month that German exports dived 5.2% to 97.7 billion euros month-on-month, the steepest decline since January 2009. Imports tumbled by 3.1% to 78.2 billion euros, the biggest one-month decline since November 2012. Germany's trade surplus narrowed to 19.6 billion euros. Economists polled by Reuters had been expecting declines both in exports and imports of about 1.2% and a trade surplus of 22.5 billion euros.

In late September, the European statistics agency Eurostat said that the eurozone consumer price index (CPI) fell 0.1% in September from a year earlier, compared to expectations for a flat reading, following a 0.1% increase in August. The Core CPI, which excludes food, energy, alcohol, and tobacco costs, increased by a seasonally adjusted 0.9% in September, in line with the forecasts and unchanged from August.

Mr. Draghi said at the end of September at the ECB meeting in Frankfurt, that the bank is prepared to beef up its bond-buying program if inflation weakens more than currently expected. Mr. Draghi also said that “if needed,” the program could “go beyond” September 2016.

The U.S. dollar has lost strength since the beginning of October after the release of the weak September nonfarm payrolls report and mixed bags of U.S. economic news. The weak dollar could be due in part to the People’s Bank of China (PBoC)’s active intervention in the forex markets, as the PBoC has been buying yuan and selling dollars to prevent the yuan from weakening beyond around 6.40 yuan per dollar.

Technically, the DXY index bounced off the 94 level last week and broke out the descending broadening (DES/B) wedge. The U.S. dollar index is retesting the 96.27 level, or 50% Fibonacci retracement. It is not new that Mr. Draghi talked down the euro when the EUR/USD exchange rate was about to break out the 1.14 level. 

A rate hike or hawkish comments, at the October 28 Fed meeting could take the DXY index higher to retest the resistance range between the 97.61 and 98.14 levels, or the index could pull back while waiting for the October nonfarm payrolls report due on November 6. The dollar could strengthen if the eurozone economy turns more negative. 

The federal funds futures, traded on the Chicago Mercantile Exchange and commonly used to estimate the market’s views on the likelihood of changes in U.S. monetary policy, indicate 6% odds for a quarter-point rate hike at the October 28 policy meeting, according to data from the CME Group as of October 22.