Dollar Slide Deepens
FOMC Fallout
The US Dollar has fallen sharply through the back of the week with the DXY down almost 2% from the week’s highs. The bulk of the reversal was driven by the July FOMC meeting on Wednesday which failed to deliver the hawkishness that bulls were looking for. The Fed held rates on change, as expected, and while 3 members dissented and voted in favour of a hike, the post-meeting presser seemed to pour cold water on hawkish Fed expectations. Fed Chairman Warsh appeared little concerned with inflation risks and praised the strength in real yields which traders took as a sign that the Fed let the market do some of the tightening for them. On the back of the meeting, pricing for a hike in September sits at around 65%, slightly lower than ahead of the meeting.
Middle East Developments
Away from Fed expectations and inflation, USD is also falling late in the week as traders monitor developments in the Middle East. Overnight, Trump shared news that Hamas has agreed to disarm and transfer power of Gaza to international troops has been seen as a major breakthrough which could help pave the wave for a broader de-escalation in the region. For now, fighting between the US and Iran continues. However, price action in USD suggests traders are starting to look beyond the conflict, with oil prices turning lower today also.
Technical Views
DXY
The sell off in the DXY has seen the index breaking back under the 100.18 level, though still atop the bull channel lows for now. While the channel holds, focus is on a continuation higher towards the 101.91 level next. If we push lower, 99.15 is next support to note.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.