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DXY: how will the Jackson Hole symposium affect the dollar?

US Dollar Index, index, DXY: how will the Jackson Hole symposium affect the dollar?

The trading idea for the dollar index (DXY) dated August 25, 2022

On Thursday, the dollar index holds positions in the area of multi-year highs, gaining a foothold above the resistance of 108.0. In the Asian session, the initiative passed to the sellers of DXY, who were able to push the index to the level of 108.10.

The weak statistics of the United States put pressure on the asset. In the housing market in July, sales decreased by 12.6%. Preliminary business activity indices for August from S&P Global declined. In the manufacturing sector from 52.2 to 51.3 pp, in the service sector from 47.3 to 44.1 pp. Data on orders for long-term consumer goods remained at the level of last month with a growth forecast of 0.6%.

The economic symposium in Jackson Hole started today.. Experts pay special attention to Jerome Powell's speech, which will take place tomorrow, Friday, August 26.

According to analysts, the chances of an increase in the FOMC rate by 50 and 75 basis points in September are approximately equal. Now the rate is at the level of 2.5% and the next act of monetary restriction will send it to the maximum of 2008, despite a slight decline in the consumer price index last month.

Wells Fargo predicts a strengthening of the dollar by the end of this year. The dollar index remains the leader among other forex currency indices and the nearest target for it is called 110.00, which fully coincides with our vision of the market.

Taking into account the fundamental background and a slight corrective decline in the index, we propose to place an order to buy DXY

Buy-limit 107.80 take-profit 110.00 stop-loss 107.10

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Symbols US Dollar Index

Other analytics by this trader

Forex analysis and forecast for AUD/USD for today, March 27, 2024
AUD/USD, currency, Forex analysis and forecast for AUD/USD for today, March 27, 2024 The consumer price index in Australia increased by 3.4% in February (YoY), which slightly exceeded forecasts of 3.3%. The price increase is due to an increase in the cost of insurance and financial services (+8.4%), tobacco products (+6.1%), housing (+4.6%) and food (+3.6%). A decrease in prices was observed for meat, meat products and seafood (-2.0%), entertainment and cultural events (-1.7%), as well as gas and other household energy sources (-1.4%).The US dollar index has stabilized after yesterday's correction and is trading at 104.00. Investors are responding positively to reports on basic durable goods orders, which increased by 0.5% in February, as well as an increase in total orders by 1.4%. The Conference Board consumer confidence index, reflecting the opinion of American households about the current and future economic situation, amounted to 104.7 points, which is slightly worse than the previous value of 104.8 points.AUD/USD Technical AnalysisOn the daily chart, AUD/USD develops a correction, breaking through the lower boundary of the ascending channel with dynamic boundaries of 0.6630–0.6530.Technical indicators confirm the sell signal: the fast moving averages on the alligator are located below the signal line, and the Awesome Oscillator indicator forms descending bars, moving away from the zero level into the sales zone.It is recommended to open short positions after the price has decreased and consolidated below the level of 0.6510. The target is at 0.6440. We will set the stop loss level at 0.6550.Purchases should be considered after the growth and consolidation of the pair above the level of 0.6560. The buyers' target is 0.6630. We will set the stop loss at 0.6530.
Mar 27, 2024 Read
EUR/USD: Fed reserves a backup option
EUR/USD, currency, EUR/USD: Fed reserves a backup option FOREX Fundamental analysis for EUR/USDThat fear and greed have big eyes. When the Federal Reserve hinted at lowering federal funds rates in 2024 at three meetings of the Federal Open Market Committee (FOMC) at the end of 2023, the markets responded with six acts of monetary expansion. This led to a drop in Treasury bond yields and the US dollar. However, in the first quarter, investors curbed their appetites, which allowed financial instruments to recover. Derivatives predict a 75 basis point rate cut and with a 75% probability predict that the Fed will make the first move in June. The market agrees with the Central Bank, but economists do not, which creates conditions for the continued growth of the EURUSD pair.Specific people are behind any decisions of large companies or financial institutions. Members of the Open Market Committee are more risk-averse than academic economists. 72% of 38 Financial Times respondents expect no more than two federal funds rate cuts in 2024. At the same time, the views of experts and the Fed on economic growth and unemployment coincide almost completely, but their opinions differ on inflation issues.The Fed's decisions affect the economy conciliatedly 18 months after the release, so sitting and waiting for inflation to fall to the target level of 2% is not the best idea. Keeping rates high for a long time is a fast path to recession. Policy easing too early increases the risks of a new round of inflation. The Fed is willing to take more risks than economists, and the market supports the Central Bank. However, what happens if US economic indicators continue to improve and inflation reaches new peaks?The Fed plans to cut rates by about 200 basis points so that the real rate remains around 0.5% with inflation around 2%. However, if the U.S. economy remains stable, most of the declines will occur in 2025-2026. What does this mean for the market? Treasury bond yields and the US dollar will continue to rise, as they did at the beginning of the year.Is this process endless? No, of course not. If the US macroeconomic statistics start to deteriorate, things could change quickly. However, the power of the American economy can become a pillar for the rest of the world's economies. With the acceleration of global GDP, support for risky assets, including the euro, will increase. On the contrary, if Donald Trump returns to power by reviving the policy of protectionism, the economies of China and the EU will slow down, and investors will once again turn to the dollar as a protective instrument.Time will tell which of these scenarios, optimistic or pessimistic, will come true. At the moment, the probability of two (or fewer) Fed rate cuts in 2024 is higher than a rate cut of 100 basis points or more. Therefore, the risks of the EURUSD pair falling to the level of 1.07 remain high. Our forex trading methods do not change. We hold and periodically increase short positions formed during the rebound from the 1.085 level.EUR/USD Technical analysisEUR/USD is in a short-term downward trend. At the moment, it's time to adjust. If the correction continues, we are waiting for testing of the resistance area 1.0894 - 1.0885. From here, we assume to look for sales with a target at the minimum of March 22. If the price breaks through and fixes below the extreme, then the Target area of 1.0729 - 1.0704 becomes the next target of the "bears".The trend line shifted to 1.0940 - 1.0927.
Mar 27, 2024 Read
Forex analysis and forecast for AUD/USD for today, March 26, 2024
AUD/USD, currency, Forex analysis and forecast for AUD/USD for today, March 26, 2024 Trading in the Asian session on Tuesday for AUD/USD shows mixed dynamics, the pair is quoted around 0.6540. The instrument showed significant growth on Monday, which is mainly attributed to technical factors.The published data from the United States put some pressure on the US currency. Thus, the volume of new home sales in February decreased by 0.3%, and the total number of homes sold decreased from 0.664 million to 0.662 million, which is lower than analysts' expectations of 0.680 million. The index of business activity in the industrial sector according to the Federal Reserve Bank of Dallas in March fell from -11.3 to -14.4.Today, investors' main attention is focused on statistics on orders for durable goods, which is taken into account by the Fed when adjusting the course of monetary policy. The index is expected to grow by 1.3% in February. If the growth rate turns out to be higher than forecasts, then the Fed's plans to cut rates in June may change.In Australia, consumer confidence data is published today. The Westpac indicator from the Melbourne Institute fell by 1.8% in March. Tomorrow, investors will follow the final assessment of the dynamics of February consumer prices, where a slight increase from 3.4% to 3.5% is expected.The RBA's semi-annual report, released on Friday, notes that high inflation and interest rates are putting pressure on household budgets, but almost all borrowers continue to repay loans on time. Debt servicing costs have increased by about 30.0-60.0% since the start of the rate hike in May 2022. One in twenty home loan holders in Australia spends more than they earn, but the delay in payments for more than 90 days is less than 1.0% of all housing loans. A strong labor market also supports the ability of the country's residents to repay debts. The unemployment rate fell to 3.7% in February, and a record number of new jobs were created.AUD/USD Technical Analysis for todayOn the daily chart, the Bollinger Band indicator shows a moderate narrowing, with a neutral MACD and a growing stochasticThe formation of long positions is possible after a break above the level of 0.6554. The target is 0.6600. The stop loss is set at 0.6530.A breakdown below the 0.6524 level may be a signal to enter sales. The target becomes 0.6486. We will place the stop loss at 0.6545.
Mar 26, 2024 Read
EUR/USD: major players record sales
EUR/USD, currency, EUR/USD: major players record sales FOREX Fundamental analysis for EUR/USDIt is difficult to talk about the fall of the dollar when the main Central Banks are much more inclined to ease policy than the Fed. Economic growth in the United States is significantly ahead of other countries, which supports the dollar against the euro. This trend is strengthening, the positions of the EURUSD bears are strengthening, and the pair's rebound upward is a consequence of the desire of some market participants to lock in profits. However, we should not forget that this scenario is only an assumption of investors. Forex currency trading largely depends on the course of the Fed's monetary policy, and the decisions of the Federal Reserve, in turn, are influenced by external data. But it is unlikely that anyone will be able to predict what the statistics will be.The strong start of the US economy in the new year has expanded the camp of market optimists. Economic growth forecasts for the United States have been revised due to a strong labor market and rising consumer spending. It is now assumed that GDP will grow by 2.2% in 2024, despite the fact that the probability of recession has decreased to 35%.Analysts predict that the Fed will cut federal funds rates only twice in 2024. This is less than expected in the market and predicted by the FOMC. The members of the Open Market Committee express different points of view. Some of them urge caution, while others insist on additional measures to stimulate the economy.In general, the Fed's goal is to beat inflation, but at the same time avoid recession. However, the risk of an economic downturn increases if indicators such as PCE reach the target level. The Fed is also paying attention to the yield curve, as its inversion in the past signaled an impending recession.History shows that the Fed reacts to the deteriorating economic situation, including rising unemployment, faster than to the warning signals of the benchmarks. As long as the macroeconomic data in the United States remains favorable, the Fed is unlikely to take active actionWe believe that the recent EURUSD rebound from the 1.08 level is most likely due to the fixation of short positions by major players and has a technical rather than fundamental explanation. Therefore, we will use the rebound from the resistances at the levels of 1.085 and 1.088 as an opportunity for new sales.EUR/USD Technical analysisThe strong drop at the end of last week was replaced by a correction based on the testing of resistance 1.0894 - 1.0885. After EUR/USD reaches this area, we are considering new sales with a target at the minimum of March 22. If the asset breaks through and consolidates below the extreme, the next target of sellers becomes the target zone 1.0729 - 1.0704.The current trend line has moved to 1.0940 - 1.0927. If this area is reached, then from here we will also look for entry into short positions.
Mar 26, 2024 Read
USD/JPY: the Bank of Japan may raise the rate again
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Mar 25, 2024 Read
Forex analysis and forecast for GBP/USD for today, March 25, 2024
GBP/USD, currency, Forex analysis and forecast for GBP/USD for today, March 25, 2024 GBP/USD shows corrective growth, testing the 1.2600 level for an upward breakout. The pair is recovering from losses at the end of last week, but the market volatility of currency pairs remains low. Traders are analyzing the results of the meetings of the US Federal Reserve and the Bank of England, at which the rate was left unchanged, and still hope that the Federal Reserve can begin a cycle of easing financial conditions to lower the rate in June, whereas the British regulator can do this only by August or later, although the comments of officials of the Central Bank clearly hint at an early rate cut.Additional pressure on sterling on Friday was exerted by UK macroeconomic statistics. Retail sales volumes turned out to be stable in February, although analysts expected an increase of 0.3% (mom). On an annual basis, the indicator fell by 0.4%. According to a study by the Confederation of British Industry (CBI), manufacturers are increasingly worried about rising product prices as shipping problems in the Red Sea raise oil prices. Nevertheless, experts expect the economic situation to improve in the next quarter. The consumer confidence index from the Gfk Group analytical portal remained at -21.0 in March, while an increase to -19.0 was expected.On Thursday, March 28, the final statistics on UK GDP for the fourth quarter of 2023 will be published. The national economy is expected to lose 0.3% quarterly and 0.2% year-on-year.Technical analysis of GBP/USD for todayThe indicator of the Bollinger Bands on the daily chart (Daily) is moderately decreasing. The MACD is declining in the negative area and confirms the sell signal. The Stochastic oscillator, which turned up near the 20 mark, indicates a possible corrective growth in the near future.Long positions can be opened after a confident breakout of the 1.2650 level. The nearest target is 1.2734. We set the stop loss at 1.2600.A rebound from the 1.2650 level followed by a breakdown below 1.2600 becomes a sell signal with a target at the key 1.2500 level. We will place the stop loss at 1.2650.
Mar 25, 2024 Read
EUR/USD: 1.05 becomes a real target
EUR/USD, currency, EUR/USD: 1.05 becomes a real target FOREX Fundamental analysis for EUR/USDThe surprise rate cut from the Swiss National Bank and the decision of representatives of the hawk wing of the Bank of England not to vote for tightening monetary policy set an example for other Central Banks. And now the head of the Bundesbank, Joachim Nagel, declares the ECB's readiness to reduce the cost of borrowing. Even if the Fed does not follow their example, this is enough for the EURUSD bears. The pair worked out the sellers' target mark at 1.08.The recent cycle of tightening financial conditions has been unique. Central banks raised rates very quickly, which made it possible to talk about the most aggressive monetary restriction in decades. However, the mitigation phase will take place in a different way. Don't wait for fireworks. Regulators intend to move slowly, carefully analyzing the input data. At the same time, some central banks simply need to increase the speed of monetary expansion.It is important to realize that at the moment, lowering rates is not an incentive for the economy, but a real antidepressant. When the ECB set the cost of borrowing at 4% in September, inflation in the Eurozone was 4.3%. That is, the real rates were about zero. Now, as the consumer price index has fallen to 2.6%, they have risen to 1.4%. The same indicator for Britain is 1.85%. This creates additional difficulties for European economies that are already quite weak.The United States, by contrast, boasts the strength of economic growth. Large fiscal incentives during the pandemic, the growth of excess savings, the influx of migrants, the development of artificial intelligence technologies and accelerated productivity growth allow GDP to grow by 3% per year and above. Such an economy can withstand high real rates. In addition, its rapid growth, rather than a soft landing, increases inflation, forcing the Fed to think three times before adjusting monetary policy.Bloomberg predicts an acceleration in the personal consumption index, which the Fed uses to analyze inflation, from 0.3% to 0.4% (mom). The three-month indicator may record the largest increase since May, and the six-month indicator may record a significant acceleration. Would the Fed really risk turning to monetary antidepressants in such circumstances?Due to the strength of the American economy, the Fed may not be in a hurry to adjust monetary policy. But what is allowed to Jupiter is not allowed to the bull. The ECB does not have such an opportunity. It is possible that the federal funds rate will remain above 5% by the end of 2024, and the deposit rate will decrease by 75 basis points. If this happens, the yield difference between American and German bonds will increase further, and the EURUSD will fall below 1.05.Thus, forex currency trading is changing the minds of investors. They are no longer so much interested in the time of the beginning of monetary expansion as in its speed. It is likely that the European Central Bank will have a much higher rate than the Fed. This provides a basis for further sale of EURUSD. The first target of 1.08 has been reached, we are going for the second one.EUR/USD Technical analysisAt the end of the week, EUR/USD broke through the key support of the short-term upward trend in the range of 1.0855 - 1.0842. Now we can say that the trend direction has changed to a downward one. Starting on Monday, we begin to look for entry points to sales on an upward correction of the asset. Favorable prices for "bears" are located in the resistance area 1.0894 - 1.0885. The nearest target for sellers is the minimum mark of today. If the pair is fixed below the extreme, then the next target will be the Target zone in the range of 1.0729 - 1.0704.The new trend boundary passes through 1.0940 - 1.0927. If EUR/USD rises to this zone, then we will also form short positions here.
Mar 25, 2024 Read
EUR/USD: Euro buyers are weak
EUR/USD, currency, EUR/USD: Euro buyers are weak FOREX Fundamental analysis on March 22, 2024Synchronization plays a key role, and there is no doubt about it. In recent days, we have been discussing how it is changing forex currency trading. We noticed that when 80% of the world's leading central banks switch to monetary policy easing, the US dollar strengthens by an average of 3% per quarter. Recently, the Swiss National Bank presented a surprise by reducing the key rate from 1.75% to 1.5%, which caused a reaction in the market and returned the EURUSD rate to a downward trend.This year, the level of synchronization of the monetary policy of the main central banks has reached the highest level since 2008. According to Bloomberg forecasts, 8 out of 11 central banks will begin easing monetary policy in the second quarter, and 2 more will join them in the third quarter. According to EFG Bank data, the world's top regulators will cut rates by 200 basis points within 18 months.Thus, the actions of the SNB opened a new round in the market, stimulating investors to move away from the euro and other risks to the US dollar. The 25 basis point rate cut by the SNB was not only a response to the current situation, but also a reaction to the strengthening of the Swiss franc. We see that the era of currency wars may return, as the global economic recovery after the pandemic implies demand for exports and slows down inflation.In parallel with the actions of the Swiss Central Bank, Mexico also lowered rates, which was the first step towards monetary expansion since 2021. The Bank of England left rates at 5.25%, but two MPC members spoke out against tightening monetary policy. This increased the probability of a rate cut in June to 70%. Derivatives estimate the scale of the Bank of England's monetary expansion at 75 basis points, the same as for the Fed.The question arises: who is next? In May, the Riksbank is likely to start cutting rates, and in June, monetary expansion will become more widespread. This synchronization and the return of currency wars could give the US dollar an advantage in the race between G10 currencies.The strength of the American economy may force the Fed to abandon three rate cuts in 2024. This will increase the risks of inflation in the United States, especially with a strengthening economy. In such a situation, even new stock index records and falling government bond yields will not help the euro. The weakening of the monetary policy of the leading European Central Banks puts the exchange rate of the single currency at risk.If EUR/USD does not return above $1,085 in the near future, the risks of the pair falling to $1.08 and $1.07 will increase significantly. The inability of the asset to respond to the Fed's "blue" rhetoric indicates the weakness of the bulls and sets up sales.Technical analysis for EUR/USDYesterday, buyers of EUR/USD tried to reach the upper limit of the Target zone of 1.0972 - 1.0946, but sellers were able to seize the initiative and win back the growth losses caused by the Fed's interest rate decision. As a result, the pair went to support (B) 1.0855 - 1.0842 and is trying to break below this area today. If sellers are able to gain a foothold below (B), then the short-term trend will change direction to a downward one. In this case, starting next week we will look for entry into short positions with a target in the area of 1.0729 - 1.0704.If the EUR/USD price returns and consolidates above (B), then it will be possible to resume the search for an entry point into long positions with an extension to the maximum on March 21.
Mar 22, 2024 Read
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