US Dollar, DXY Index, USD, Fed, FOMC, China, CSI 300, Hang Seng – talking points
- the U.S. dollar remains range bound as Fed meeting unfolds
- An impending tightening by the BoE and the ECB is also clouding expectations
- China’s reopening could offer a bright spot. Will this send the DXY index down?
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The US dollar continues to tread water to start the week ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting.
The market expects the target interest rate to rise by 25 basis points (bps). Friday’s PCE inflation data suggests that a slowdown in rate hikes may be appropriate.
A key aspect will be the post-decision press conference, where Fed Chair Jerome Powell will speak in a question-and-answer session. US Treasury Secretary Janet Yellen pointed out the risks of a recession last Friday.
Central banks are in for a big week as the Bank of England (BoE) and European Central Bank (ECB) are also due to give judgment on their respective interest rate paths on Thursday. A Bloomberg poll of economists is forecasting a 50 basis point hike from both banks.
Markets in mainland China reopened today after a week’s hiatus to celebrate the Lunar New Year. The CSI 300 stock index opened over 2% higher but then fell lower on the day. Hong Kong’s Hang Seng Index (HSI) fell deep into the red, falling more than 1.6% at times.
The Korean Kospi Index was also significantly lower, while the Australian and Japanese indices were little changed. Futures markets are pointing to a favorable start to the Wall Street cash session later.
FX markets had a quiet start to the week as Crude Oil continued to languish after Friday’s sell-off. OPEC+ will meet on Wednesday to discuss production targets, which most of the market expects will remain unchanged.
Gold has also been muted so far, trading around $1,930 at press time.
Following today’s German GDP numbers, the US will see the latest reading of the Dallas Fed’s manufacturing activity index.
The full economic calendar can be viewed here.
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DXY (USD) INDEX TECHNICAL ANALYSIS
The DXY index continues to trade near the 10-month low. 101.50 monthly low and 101.30 May 2020 low might offer support. The price has been in the 101.50 – 103.49 range for the past 3 weeks.
On the upside, resistance could lie at 103.42 breakpoint or previous highs of 103.49, 105.63, 105.82, 107.20 and 108.00.
Chart created in TradingView
— Written by Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @DanMcCathyFX on twitter
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