November 10, 2022 dollar index (DXY) trading idea
For the second session in a row, the dollar index is developing positive dynamics and trading near the 110.35 level. Thursday forex trading is sluggish as investors are in no hurry to form new positions, preferring to wait for the release of the US inflation report, which influences the Federal Reserve's decision on the monetary policy course.
The forecast is for inflation to slow from 8.2% to 8.0% (y/y), which is still four times the regulator's target of 2%. Moreover, the indicator is expected to strengthen in monthly terms, so the Fed is unlikely to abandon its plan to raise the rate by 75 basis points in December, although the probability of a 0.5% monetary tightening has risen to 53% in the futures market.
The main indicator in today's report should be core inflation, which is at a 40-year high of 6.6%. If the index exceeds the forecasted values, the probability of more aggressive monetary policy tightening by the Fed will increase and the dollar will return to strengthening.
The market participants also continue to follow the results of the Congressional elections. The Democratic Party is clearly losing to the Republicans, who at the moment got 207 seats in the House of Representatives and 48 seats in the Senate. They need 218 and 51 seats, respectively, to win a majority. Counting of the votes is still underway, so the results could change. However, if the Democrats remain in the minority, it will make it difficult for the president's administration and increase political uncertainty, which will support the dollar's rise.
Let's place a buy order for the DXY.
Buy-limit 110.20 take-profit 113.20 stop-loss 109.20
Read more: About the US Dollar Index DXY