Dollar Decline Continues
The US Dollar has come under heavy selling pressure this week as traders prepare to receive the latest FOMC minutes later today, followed by comments from Fed chair Powell later in the week. On the back of yet a further drop in inflation and growing concerns over the strength of the labour market, Fed easing expectations have ballooned with the market now pricing in at least .75% worth of cuts ahead of year end.
FOMC in Focus
Looking ahead today, traders will be highly sensitive to any dovish details in the FOMC minutes. In particular, any comments suggesting support for multiple rate cuts ( remember, as of the last dot plot update the Fe dis only forecasting one cut this year). Comments around inflation and the jobs market will also be key today. In light of a further dip in inflation last week, any comments suggesting the need for ‘more evidence’ should feed into the bearish USD narrative ( given that we’ve now had ‘more evidence’). Comments on the labour market, particularly anything relating to perceived recessionary risks will also be highly market moving on the back of the volatility we saw at the start of the month.
Bullish Risks
Given that market pricing for rate cuts has shifted so much in recent weeks, and USD has pushed so far south, the risk is that today’s minutes won’t prove dovish enough for USD bears. In the event that today’s minutes fail to provide any fresh, bearish catalyst, we’ll likely see some USD consolidation ahead of Powell’s Jackson Hole speech which will be the headline event of the week.
Technical Views
DXY
The sell off in the Dollar has seen the index breaking down below the 102.46 level and the bull trend line. While below here and with momentum studies bearish, the focus is on a test of the 100.93 with risks skewed towards a test of deeper support at the 99.67 level beyond.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.