DXY Firmly Focused on Fed Rate Announcement

U.S. DOLLAR ANALYSIS

• Stout US economic system could lengthen urge for food for future price hikes.
• Fed anticipated to carry charges at present ranges.
• Bearish divergence suggests short-term greenback weak spot to come back.

DOLLAR INDEX FUNDAMENTAL FACTORS

The US greenback had a rollercoaster of per week with starting with combined US CPI figures adopted by PPI and retail gross sales that bolstered the strong state of the US economic system and hinted at potential inflationary pressures to come back. Though the ‘greater for longer’ message stays and probably appears to be like to be extra persistent, the outlook for subsequent weeks Fed price announcement is more likely to lead to a price pause.

Cash market pricing as proven under displays the likelihood for yet another price hike if wanted (as recommended by Fed audio system) however the sustained elevated rate of interest setting may preserve dollar energy. Curiously, price cuts for December 2024 was revised decrease by roughly 7bps on Friday to 81bps in response to current US financial information regardless of a drop off within the newest Michigan client sentiment report. As well as, a weakening euro may complement greenback upside with the euro comprising 57.6% of the Greenback Index (DXY).

IMPLED FED FUNDS FUTURES

Supply: Refinitiv

The announcement subsequent week (see financial calendar under) might be extra about what comes subsequent by way of steering round mountaineering in November or December this yr. I anticipate extra of the identical from Fed Chair Jerome Powell in that the messaging will reiterate the significance of knowledge dependency whereas holding the door open for future price hikes if required. Constructing allow information will precede the Fed’s announcement however shouldn’t have a serious materials affect on determination making.

US ECONOMIC CALENDAR (GMT +02:00)

Supply: DailyFX financial calendar

TECHNICAL ANALYSIS

U.S. DOLLAR INDEX (DXY) DAILY CHART

Chart ready by Warren Venketas, IG

Worth motion on the every day DXY chart above may paint an image of two tales, the primary being bearish/unfavourable divergence the place costs exhibit greater highs whereas the Relative Power Index (RSI) prints decrease highs usually resulting in subsequent draw back to come back (a risk if markets understand the Fed’s steering as dovish).

From a bullish perspective, though not fairly developed is the possibility for a golden cross formation ought to the 50-day shifting common (yellow) cross above the 200-day shifting common (blue). The probability of one other push greater is lower than that of a pullback in the direction of subsequent assist zones.

Resistance ranges:

Assist ranges:

Contact and followWarrenon Twitter:@WVenketas