• US dollar bulls are moving in following a significant sell-off in the greenback. 
  • US yields perked up towards the end of the week as hawkish Fed sentiment overrides softer US inflation data.

The US dollar, DXY, was set for its third weekly loss in four against its rivals, but the bulls are moving in on the final day of the week in a turnaround in US yields and mix sentiment surroufing the outlook for the Federal Reserve. At the time of writing, DXY is trading at 105.2810, up 0.18% on the day so far. 

Benchmark US 10-year Treasury yields were oscillating near a three-week peak, recovering on Thursday as San Francisco Federal Reserve Bank President Mary Daly said a 50-basis-point interest rate hike in September "makes sense" given the recent economic data including inflation. Crucially, she also said that she is still open to a bigger rate hike if data warrants.

Earlier this week, US Fed policymakers noted that they would continue to tighten monetary policy until price pressures were fully broken. Following yesterday's CPI, Neel Kashkari unleashed his inner hawk and said the July CPI data did not change his expected rate path, though he was happy to see inflation surprise to the downside. Kashkari stressed that the Fed is far from declaring victory over inflation and stressed that recession “will not deter me” from getting to the 2% target. 

Fed funds futures traders are now pricing in a 61.5% chance of a 50-basis-point hike in September and a 38.5% chance of a 75-basis-point increase. Analysts at Brown Brothers Harriman explained that WIRP is now showing only 45% odds of a 75 bp hike at the September 20-21 FOMC meeting vs. 80% before the CPI data.

''Looking ahead, the swaps market is now pricing in a 3.5% terminal rate vs. 3.75% at the start of this week.  We think the markets are once again overreacting to one data point. The battle to lower inflation is likely to be long and protracted, with most Fed policymakers looking at an extended tightening cycle. Yes, we may have seen the worst in terms of inflation, but we are a long way from the Fed’s 2% target.  Markets should also reprice the more dovish expectations in the coming days and weeks.''

Meanwhile, analysts at TD Securities argued that ''a potential inflation peak (and associated end to Fed terminal rate price discovery) is an important ingredient to call the top in the USD.''

''The other key (and arguably) more important ingredient is the outlook for global growth. On that factor, we don't think it is time to completely fade the USD, though the recent backdrop reductions convictions on USD long exposure,'' the analysts explained. 

Dollar Index Spot

Overview
Today last price 105.28
Today Daily Change 0.17
Today Daily Change % 0.16
Today daily open 105.11
 
Trends
Daily SMA20 106.5
Daily SMA50 105.5
Daily SMA100 103.51
Daily SMA200 99.93
 
Levels
Previous Daily High 105.46
Previous Daily Low 104.64
Previous Weekly High 107.43
Previous Weekly Low 105.54
Previous Monthly High 109.29
Previous Monthly Low 104.69
Daily Fibonacci 38.2% 104.95
Daily Fibonacci 61.8% 105.15
Daily Pivot Point S1 104.68
Daily Pivot Point S2 104.25
Daily Pivot Point S3 103.86
Daily Pivot Point R1 105.5
Daily Pivot Point R2 105.89
Daily Pivot Point R3 106.32

 

 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended content


Recommended content

Editors’ Picks

EUR/USD rebounds above 0.9800 on renewed dollar weakness

EUR/USD rebounds above 0.9800 on renewed dollar weakness

EUR/USD has gathered recovery momentum and turned positive on the day above 0.9800 in the American session on Monday. The disappointing ISM Manufacturing PMI from the US weighed heavily on the greenback, providing a boost to the pair.

EUR/USD News

GBP/USD clings to impressive daily gains near 1.1300

GBP/USD clings to impressive daily gains near 1.1300

GBP/USD has extended its daily rally and touched a fresh 10-day high above 1.1300 in the second half of the day on Monday. The UK government's U-turn on the fiscal plan and the broad-based selling pressure surrounding the greenback after PMI data fuel the pair's upside.

GBP/USD News

Gold bulls aim to challenge the $1,700 threshold

Gold bulls aim to challenge the $1,700 threshold

Gold picked up momentum after Wall Street’s opening, and runs above $1,690.00 a troy ounce, trading at its highest in three weeks. The greenback sheds ground on the back of the better performance of equities, coupled with tepid US data.

Gold News

Cardano could be set for 12% gains just this week alone

Cardano could be set for 12% gains just this week alone

ADA could set itself up this week for a perfect opportunity to go long in a bear market. Markets may experience some risk-on this week, with markets potentially set to jump, and equities and a weaker dollar offering some room for cryptocurrencies to rally in.

Read more

TSLA set to fall more as delivery data disappoints

TSLA set to fall more as delivery data disappoints

Tesla (TSLA) looks set to open sharply lower on Monday as the equity market continues to battle raging storms. Last week was a momentous one in currency markets, and those of us in equity land need to keep note of this.

Read more

Forex MAJORS

Cryptocurrencies

Signatures