The U.S. dollar recently experienced a decline, potentially influenced by indications from the Federal Reserve suggesting possible rate cuts in the upcoming year. This speculation contributed to the dollar's weakest performance in terms of weekly decline since July.
The U.S. dollar, measured by the DXY index, faced significant losses recently due to the decline in U.S. Treasury yields across most tenors following the Federal Reserve’s pivot. Although the central bank maintained unchanged policy settings, it unexpectedly embraced a dovish posture, contrary to prior rhetoric.
To provide context, the Fed displayed a more optimistic view of the inflation outlook, acknowledged discussions about rate cuts, and signaled 75 basis points of easing in 2024 at the year's final meeting. This unexpected shift caught investors by surprise, leading to a sharp decline in interest rate expectations.
In summary, current market sentiment suggests the Federal Reserve may significantly adjust its stance in the coming year, potentially leading to continued downward pressure on bond yields and the U.S. dollar in the short term. However, this scenario remains subject to shifts based on forthcoming economic data. If incoming data indicates robust economic growth and persistent inflationary pressures, there could be revisions in interest rate expectations. Therefore, traders are advised to closely monitor the economic calendar to navigate the evolving economic landscape.
As stated in previous analysis, the market was trading between the 1.25950 and 1.25400 level with the 1.24500 level holding its ground since last wednesday. Also indicated that market was only going to be bullish when the market breaks above 1.25950 level.
The Cable gained a massive 220 pip or 1.75% move since breaking the 1.25950 level. At the moment, price has rejected the support level at 1.26721 and may retest Friday's high at 1.27909.
Alternatively, Price breaking below 1.26721 would send price toward the 1.26333 and 1.26178 level.
The U.S. dollar, measured by the DXY index, faced significant losses recently due to the decline in U.S. Treasury yields across most tenors following the Federal Reserve’s pivot. Although the central bank maintained unchanged policy settings, it unexpectedly embraced a dovish posture, contrary to prior rhetoric.
To provide context, the Fed displayed a more optimistic view of the inflation outlook, acknowledged discussions about rate cuts, and signaled 75 basis points of easing in 2024 at the year's final meeting. This unexpected shift caught investors by surprise, leading to a sharp decline in interest rate expectations.
In summary, current market sentiment suggests the Federal Reserve may significantly adjust its stance in the coming year, potentially leading to continued downward pressure on bond yields and the U.S. dollar in the short term. However, this scenario remains subject to shifts based on forthcoming economic data. If incoming data indicates robust economic growth and persistent inflationary pressures, there could be revisions in interest rate expectations. Therefore, traders are advised to closely monitor the economic calendar to navigate the evolving economic landscape.
As stated in previous analysis, the market was trading between the 1.25950 and 1.25400 level with the 1.24500 level holding its ground since last wednesday. Also indicated that market was only going to be bullish when the market breaks above 1.25950 level.
The Cable gained a massive 220 pip or 1.75% move since breaking the 1.25950 level. At the moment, price has rejected the support level at 1.26721 and may retest Friday's high at 1.27909.
Alternatively, Price breaking below 1.26721 would send price toward the 1.26333 and 1.26178 level.
