The US Dollar Holds Steady After Reaching an 11-Week High
- US equities pull back from record highs as Fed rate cut expectations shift
- US Dollar Index trades in a tight range, failing to break above 104.00
The US Dollar (USD) experienced a slight retracement on Tuesday following a recent surge that pushed the US Dollar Index (DXY) to an 11-week high. This move came after US equities retreated from their all-time highs, causing a shift in market expectations regarding potential Federal Reserve (Fed) rate cuts. As the Fed’s stance on monetary policy becomes less certain, investors are reevaluating their interest rate cut projections, with indications that the Fed may only cut rates once more this year before adopting a wait-and-see approach.
Despite a light economic calendar, investors are closely watching Fed speakers for clues on the central bank’s future actions. With varying opinions within the Federal Open Market Committee (FOMC), market participants are eager to hear from officials like Philadelphia Fed President Patrick Harker to gain insight into the Fed’s next move.
Daily Market Analysis: Fed Policy and Market Movement
- Philadelphia Fed President Patrick Harker to speak at Fintech Conference
- Richmond Fed Manufacturing Index expected to show slight improvement
- Global equities show mixed performance, with US futures in the red
- CME Fedwatch Tool predicts a 87.0% chance of a 25 bps rate cut in November
- US 10-year benchmark rate rises to 4.20% amid bond sell-off
US Dollar Index Technical Analysis: Future Outlook
The US Dollar Index (DXY) is currently trading within a narrow range, facing resistance at the 103.99/104.00 level. If market sentiment shifts towards fewer rate cuts from the Fed, the index could quickly climb to 105.00. On the downside, the 200-day SMA at 103.80 provides strong support, with further levels at 103.19 and 101.90 in case of a breakdown.
Technical analysis suggests that a break above 104.00 could lead to further gains towards 105.00 and beyond, while a drop below key support levels may signal a bearish trend for the US Dollar Index.
US Dollar Index: Daily Chart
Fed FAQs: Understanding Federal Reserve Policy
Monetary policy in the US is driven by the Federal Reserve (Fed), with a focus on achieving price stability and full employment. The Fed adjusts interest rates to control inflation and stimulate economic growth, impacting the value of the US Dollar. Fed meetings, attended by FOMC members, play a crucial role in shaping policy decisions.
In extreme situations, the Fed may implement measures like Quantitative Easing (QE) to boost credit flow or Quantitative Tightening (QT) to reduce financial stimulus. These policies have significant implications for the US Dollar’s value and overall economic stability.