Dollar Index (DXY) Trading Idea for July 26, 2023
Since the beginning of the week, the dollar index has been trading around 101.00. Investors are waiting for the outcome of the Fed's two-day meeting, which will be released today at 18:00 GMT.
The weak United States business activity indices published at the beginning of the week put pressure on the US currency index. Although the manufacturing business activity index rose from 46.3 to 49.0, it still remains below the key 50.0 level. Service sector business activity fell from 54.0 to 52.4 pp.
The FOMC is expected to raise the rate by 25 basis points to 5.5% at today's meeting. However, investors are more interested in the regulator's monetary policy outlook, which they hope to hear about during Jerome Powell's press conference half an hour after the official release.
Analysts believe that today's act of monetary restriction will be the final in the cycle of rate hikes and after it the regulator will take a wait-and-see attitude. The Central Bank will start easing financial conditions not earlier than the first quarter of 2024.
Actually, the markets have already factored today's rate hike into asset prices, so the rule "buy on rumors, sell on facts" is relevant again. Nevertheless, we believe that the dollar index will be weaker against other forex indices and we prioritize short positions on DXY
- sell-limit 101.50
- take-profit 99.50
- stop-loss 102.20.