US Dollar, DXY Index, ECB, Fed, Crude Oil, EUR/USD, GBP/USD, USD/JPY – Talking Points
- The US Dollar has been buried by hopes of a less hawkish Fed
- The ECB are all set to raise rates again as EUR/USD holds the high ground
- Treasury yields are lower. If the Fed doesn’t pivot, will the DXY Index bounce back?
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The US Dollar took a pounding overnight as the market appears to be looking for a less hawkish Federal Reserve ahead of next week’s Federal Open Market Committee (FOMC) meeting.
Futures and swaps markets are pricing in a 75 basis point lift at the Fed’s meeting next Wednesday and a 50 bp boost at December gathering.
It is the peak in rates next year that has some pundits excited and at the moment, that apex is currently being priced in for the second quarter. Treasury yields have moved lower across the curve with the benchmark 10-year note dipping below 4%.
Ahead of that, the European Central Bank (ECB) is poised to hike by 75 bp later, according to market pricing and economist forecasts. EUR/USD has held onto gains so far through Asian trade as is the case for most pairs against the US Dollar.
Even USD/JPY is languishing, trading down toward 146 after an eventful start to the week that most likely saw the Bank of Japan selling on Monday.
GBP/USD is trading back up to levels last seen in mid-September as the mini budget debacle appears to be well and truly in the rear-view mirror.
The Bank of Canada (BoC) raised their overnight lending rate by 50 bps, less than the 75 bp forecast. USD/CAD initially rocketed higher on the news but then ended up where it started.
Meta and Samsung have release results that have missed targets, compounding the negative mood in tech names after Apple, Microsoft and Alphabet also disappointed expectations over the last few days.
The Nasdaq 100 lost 2.04% in the cash session but futures are pointing toward a steady start later today, along with the other main indices ion Wall Street. Tech stocks can appear vulnerable in a rising interest rate environment such as the one that is unfolding.
APAC equites have been relatively subdued, with the exception of Hong Kong’s Hang Seng Index (HSI). It has managed a 2% rally today, clawing back some of the heavy losses seen earlier in the week.
The Biden administration have re-worked their plan to cap the Russian oil price, but the finer details are yet to be completely ironed out. The WTI futures contract is near US$ 88 bbl while the Brent contract is around US$96 bbl at the time of going to print.
After the ECB’s rate decision, the US will see GDP, durable goods and jobs data.
The full economic calendar can be viewed here.
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DXY (USD) INDEX TECHNICAL ANALYSIS
The DXY index is a US Dollar index that is weighted against EUR (57.6%), JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%) and CHF (3.6%).
The DXY index collapsed this week after breaking below a near term ascending trend line. In the bigger picture, it remains within as ascending trend channel.
Support could be at the next ascending trend line that coincides with the 100-day simple moving average (SMA) that is currently near 108.40.
On the topside, resistance might be at the break points of 110.06, 111.47 and 111.77.
Chart created in TradingView
— Written by Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @DanMcCathyFX on Twitter
