US Dollar, DXY Index, USD, FOMC, USD/KRW, AUD/USD, China – Talking Points
- U.S. dollar weakened in Asia after an excellent run in New York
- Korea left rates unchanged while the Australian dollar was boosted by solid data
- The Fed reminded markets of its intention. will send it U.S. dollar higher?
Recommended by Daniel McCarthy
Characteristics of successful traders
The US dollar retreated from overnight gains that were announced after Federal Open Market Committee (FOMC) meeting minutes revealed a unified board that supported the 25 basis point move at the previous month’s meeting
The minutes reinforced the notion that the Fed is determined to get inflation under control and that rate cuts are a long way off. This is something they have verbalized on many occasions but perhaps not fully understood by the markets.
Interest rate swap and futures markets now have 25 basis points of increases for the next three FOMC meetings in March, May and June. Treasury yields are a bit weaker on hopes that the Fed will bring inflation under control later on.
New York Fed President John Williams was also on the phone yesterday and reiterated his hawkish stance, emphasizing the need to get price pressures under control.
In an interview on Bloomberg TV, Augustin Carstens, CEO of the Band of International Settlements (BIS), said fiat currencies have won the cryptocurrency battle. Bitcoin remains below $25,000 and is trading near $24,600 at press time.
The Bank of Korea (BoK) left interest rates unchanged at 3.50%, although the CPI is currently at 5.2% yoy. BoK Governor Rhee Chang-yong said in the news conference after the decision that more hikes could still happen despite the pause. Nonetheless, USD/KRW fell below 1300.00.
The Australian dollar was the best-performing currency today, after data on private investment spending showed quarter-on-quarter growth of 2.2% in Q4 2022, versus 1.0% forecast. The previous quarter was also revised upwards from -0.6% to 0.6%.
Crude Oil stabilized after heavy losses yesterday, with the WTI futures contract back above $74 barrels and the Brent contract up to $81 barrels.
APAC stocks had a quiet day with Japan on vacation and futures are pointing to a solid start to Wall Street later today.
Elsewhere, China ordered state-owned companies to stop using the top four accounting firms Deloitte, EY, KPMG and PWC.
The directive comes after Beijing last year agreed to allow auditors to audit the books of Chinese companies listed on US stock exchanges. This action prevented these companies from being thrown out of the US.
Looking ahead, after the pan-European CPI, the US GDP data will be closely watched by the market.
The full economic calendar can be viewed here.
Trade Smarter – Sign up for the DailyFX newsletter
Receive timely and compelling market commentary from the DailyFX team
Subscribe to Newsletter
DXY (USD) INDEX TECHNICAL ANALYSIS
The DXY index has broken out of a descending trend channel and has consolidated above it, which could indicate that the bearish trend could be paused or over.
The price also moved above the 10-, 21- and 55-day simple moving averages (SMA) to strengthen the breakout. This could indicate that a bull market may be developing in the short and medium term.
The longer-term 100- and 200-day SMAs are above the price and a move above it could confirm the development of a bull market and that a new one might be on the horizon.
Resistance might lie at the previous highs of 104.67, 105.63 and 105.82. On the downside, support might lie at the previous lows and breakpoints of 102.58, 101.30 and 100.82.
Chart created in TradingView
— Written by Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @DanMcCathyFX on twitter
Comments are closed.