Dollar Correction Continues, DXY Posts Weekly Decline
The U.S. dollar, measured by the DXY index, trades lower for a third straight day as the greenback’s rally faltered during the second half of the week. The index pulled back from a fresh cycle high of 110.78 to below 109.00 on Friday.
The DXY index ends the week around 109.00, recording a 0.6% daily loss, having bottomed at an intra-day low of 108.36.
On Thursday, during his first appearance since Jackson Hole, Fed Chair Jerome Powell held onto his hawkish rhetoric. He reaffirmed his compromise with price stability and highlighted the need to anchor the public’s inflation expectations. He argued that the committee “Needs to act now, forthrightly, strongly as we have been doing” and that the FOMC is “strongly committed to this project and will keep at it.”
In addition, Charles Evans from the Chicago Fed commented that the committee will likely lean towards a 75 bps increase in the next meeting but that he hasn’t made up his mind yet.
The swap markets suggest that the tightening expectations remain elevated as the WIRP shows higher odds of nearly 90% of a 75 bps hike on September 21, while the terminal rate that the markets are currently pricing remains at 4.0%.
According to the weekly chart, the bullish outlook remains intact for the DXY despite printing the first red candle since the start of August.
The short-term DXY bias is also bullish, with daily indicators losing momentum but not showing signs of reversal yet.
On the upside, the following resistance levels line up at 109.55 and 110.00 ahead of the cycle high of 110.78. On the downside, the immediate support level is seen at the 20-day SMA, currently at 108.60. Loss of this level would expose the August 26 low of 107.58 and then the 107.45 area.
The DXY index ends the week around 109.00, recording a 0.6% daily loss, having bottomed at an intra-day low of 108.36.
On Thursday, during his first appearance since Jackson Hole, Fed Chair Jerome Powell held onto his hawkish rhetoric. He reaffirmed his compromise with price stability and highlighted the need to anchor the public’s inflation expectations. He argued that the committee “Needs to act now, forthrightly, strongly as we have been doing” and that the FOMC is “strongly committed to this project and will keep at it.”
In addition, Charles Evans from the Chicago Fed commented that the committee will likely lean towards a 75 bps increase in the next meeting but that he hasn’t made up his mind yet.
The swap markets suggest that the tightening expectations remain elevated as the WIRP shows higher odds of nearly 90% of a 75 bps hike on September 21, while the terminal rate that the markets are currently pricing remains at 4.0%.
According to the weekly chart, the bullish outlook remains intact for the DXY despite printing the first red candle since the start of August.
The short-term DXY bias is also bullish, with daily indicators losing momentum but not showing signs of reversal yet.
On the upside, the following resistance levels line up at 109.55 and 110.00 ahead of the cycle high of 110.78. On the downside, the immediate support level is seen at the 20-day SMA, currently at 108.60. Loss of this level would expose the August 26 low of 107.58 and then the 107.45 area.