There is an extension of the greenback's recent rebound and now it looks like the greenback is set to consolidate its recent breakout of the key hurdle at 102.00 when measured by the USD Index (DXY).
On Tuesday, the index gained ground for the fourth consecutive session, surpassing the 102.00 yardsticks and gradually approaching the initial resistance at the 3-month line around 102.80, which marked the first resistance point.
In the meantime, cautiousness continues to run high and the risk-off mood prevails among market participants ahead of the key FOMC event due on Wednesday, where the Fed is expected to hike rates by ¼ percentage point.
Later in the NA session, the Consumer Confidence for the month of January measured by the Conference Board will take center stage seconded by the FHFA House Price Index and the Chicago PMI.
The dollar picks up the pace and manages to leave behind the key 102.00 mark against the backdrop of persistent prudence ahead of the imminent FOMC gathering (Wednesday).
The idea of a probable pivot in the Fed’s policy continues to hover around the greenback and keeps the price action around the DXY somewhat subdued. This view, however, also comes in contrast to the hawkish message from the latest FOMC Minutes and recent comments from rate-setters, all pointing to the need to advance to a more restrictive stance and stay there for longer, at the time when rates are seen climbing above the 5.0% mark.
On the latter, the tight labor market and the economy's resilience are also seen as supportive of the firm message from the Federal Reserve and the continuation of its hiking cycle.
Key events in the US this week: FHFA House Price Index, CB Consumer Confidence (Tuesday) – MBA Mortgage Applications, ADP Employment Change, Final Manufacturing PMI, ISM Manufacturing, Construction Spending, FOMC Interest Rate Decision (Wednesday) – Initial Jobless Claims, Factory Orders (Thursday) – Nonfarm Payrolls, Unemployment Rate, Final Services PMI ISM Non-Manufacturing (Friday).
Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Prospects for extra rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.
There is now a 0.08% gain on the index at 102.32, but the first hurdle is at the weekly high of 102.89 (January 18), followed by 105.63 (the month-to-month high of January 6) and then 106.47 (the 200-day moving average). A breach of 101.50 (2023 low January 26) would also open the door for a breach of 101.29 (the monthly low of May 30, 2022) and finally 100.00 (the psychological level).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell these assets. You should do your own thorough research before making any investment decisions. EnclaveFX Ltd does not in any way guarantee that this information is free of mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in the Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses, and costs associated with investing, including the total loss of principal, are your responsibility.
EnclaveFX Ltd and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. EnclaveFX Ltd and the author will not be liable for any errors, omissions, or any losses, injuries, or damages arising from this information and its display or use. The company is not responsible for errors or omissions.
