Trading idea for the dollar index (DXY) from November 24, 2022
In Thursday's Asian session, the dollar index is now trading near 105.80. The day before, the DXY got caught in a wave of sell-offs and rolled back to local lows. The volatility of currency pairs is low, as the USA is celebrating Thanksgiving today.
The reason for the dollar index decline was the yesterday's publication of the FOMC meeting minutes, from which investors found out that the overwhelming majority of the FOMC members find it necessary to slow down the monetary restriction rate. On this news, 10-year bond yields fell below 3.7%.
According to CME Group FedWatch Tool, there is a 76% chance of a 50 basis point rate hike in December, although inflation remains at 7.7%, well above the 2% target.
Despite unanimity on the issue of slowing the pace of monetary tightening, FOMC members are undecided on a rate hike ceiling. According to the head of Fed of San Francisco Mary Daly, the rate should be raised to 4.75%-5.25%. Experts think that the markets are overly optimistic about the imminent end of the tightening period of the monetary policy. In any case, there is no fundamental reason for this. As soon as investors realize the reality of what is happening, the dollar will return to strengthening According to Goldman Sachs, DXY expects another wave of growth.
Some support for the DXY was provided by yesterday's US statistics - the report on durable goods orders and the data on new home sales.
We suppose that the US Dollar index keeps the potential for growth and we place the sell order
Buy-stop 106.00 take-profit 108.00 stop-loss 105.40