US Dollar Index: Awaiting FOMC economic estimates

US Dollar Index H4

The Dollar’s initial weaker reaction to Thursday’s May inflation report, (it continued to rise to 5% annually from the 4.2% seen in April and the CORE reading at 3.8% was close to a 30-year high), which sent the USDIndex to test the week’s low zone at 89.90, was short – lived. Friday, saw a rapid supporting rally for the Dollar index to remain within the bullish channel, which is now fixed in the high zone for the month around the 90.55 level.

The USDIndex in June is holding over the key 90.00 level and the May low zone around 89.50. Markets are now waiting for clarity from the FOMC at this week’s meeting (Tuesday-Wednesday) on the direction of interest rate policy. (Which is now at 0.0% – 0.25%), including the purchase of bonds. It is widely speculated that the Fed has no plans to tighten its policy at this time. However, with continued high inflation Investors are keeping an eye on policymakers’ economic projections. Following this week’s meetings, the FOMC will next meet July 27-28 and then not until autumn and September 21-22, some three months away.

According to a Bloomberg survey, 18 of 51 economists expect a rate hike in 2023, while 40 percent of economists expect the Fed to cut its bond purchasing rate ($120 billion per month) in August, with 24% expecting it to be September.

However, Fed Chair Powell has previously said that the central bank will warn in advance if there will be a reduction in bond purchasing. Not to repeat the anger in 2013 when markets were stunned by the Fed’s policy change and the now notorious “taper tantrum”.

Technically, in the H4 timeframe, the price can rise above the MA200 line for the second time in a month. After the first time, USDIndex was unable to hold above the MA200 as the non-farm payroll numbers missed their target. However, this time round sees the MA50 moving closer to the MA200, giving it a chance to see a crossover this week. Should it occur, it will be an important trend for the second half of the year for the US Dollar. Depending on the FOMC meeting and statement on Wednesday (from 18:00 GMT) the bullish target is now at the May high zone of 91.40 and the key support zone remains at 90.00.

EUR/USD weakens to near 1.1900 as traders eye US data

EUR/USD eases to near 1.1900 in Tuesday's European trading hours, snapping the two-day winning streak. Markets turn cautious, lifting the haven demand for the US Dollar ahead of the release of key US economic data, including Retail Sales and ADP Employment Change 4-week average.

GBP/USD stays in the red below 1.3700 on renewed USD demand

GBP/USD trades on a weaker note below 1.3700 in the European session on Tuesday. The pair faces challenges due to renewed US Dollar demand, UK political risks and rising expectations of a March Bank of England rate cut. The immediate focus is now on the US Retail Sales data.

Gold sticks to modest losses above $5,000 ahead of US data

Gold sticks to modest intraday losses through the first half of the European session, though it holds comfortably above the $5,000 psychological mark and the daily swing low. The outcome of Japan's snap election on Sunday removes political uncertainty, which along with signs of easing tensions in the Middle East, remains supportive of the upbeat market mood. This turns out to be a key factor exerting downward pressure on the safe-haven precious metal.

Bitcoin Cash trades lower, risks dead-cat bounce amid bearish signals

Bitcoin Cash trades in the red below $522 at the time of writing on Tuesday, after multiple rejections at key resistance. BCH’s derivatives and on-chain indicators point to growing bearish sentiment and raise the risk of a dead-cat bounce toward lower support levels.

Follow the money, what USD/JPY in Tokyo is really telling you

Over the past two Tokyo sessions, this has not been a rate story. Not even close. Interest rate differentials have been spectators, not drivers. What has moved USD/JPY in local hours has been flow and flow alone.

Bitcoin Cash trades lower, risks dead-cat bounce amid bearish signals

Bitcoin Cash (BCH) trades in the red below $522 at the time of writing on Tuesday, after multiple rejections at key resistance. BCH’s derivatives and on-chain indicators point to growing bearish sentiment and raise the risk of a dead-cat bounce toward lower support levels.