The Greenback Consolidates Amid Geopolitical Tensions
- The US Dollar (USD) stabilizes on Monday after a subdued start in Asia.
- Focus shifts to geopolitics as the Biden Administration approves Ukraine to use long-range US missiles against Russia.
- The US Dollar index remains above 106.50, seeking direction amidst global tensions.
The US Dollar Index (DXY) is in consolidation mode on Monday, following a quiet beginning to the week in the Asian session. The index, which measures the Greenback’s strength against six major currencies, hovers slightly in the red near a recent year-to-date high above 106.50. The primary driver for the currency on Monday stems from the Biden Administration’s approval on Sunday for Ukraine to utilize long-range US missiles to target Russian infrastructures within Russian borders, just ahead of the G20 meeting in Rio De Janeiro.
The US response comes in light of Russia’s deployment of nearly 50,000 troops to Kursk, a southern Russian region. This decision is largely a reaction to Russia’s reinforcement with North Korean ground troops, causing concern in Washington and Kyiv, as reported by Reuters.
While the US economic calendar remains light on Monday, with only a speech by Federal Reserve Bank of Chicago President Austan Goolsbee scheduled, market participants will closely monitor the G20 meeting and developments surrounding Ukraine.
Daily Digest Market Movers: The Storm Has Passed
- The G20 summit in Rio de Janeiro will draw attention, with Ukraine at the forefront of discussions following recent escalations in the region.
- Key events include remarks by Federal Reserve Bank of Chicago President Austan Goolsbee and the release of the National Association of Home Builders (NAHB) Housing Market Index for November.
- Equity markets exhibit mixed sentiment at the start of the week, with Nvidia’s earnings report post-US closing bell on Wednesday being a focal point.
- The CME FedWatch Tool indicates a 61.9% probability of a 25 basis points rate cut by the Fed at the December 18 meeting, with a 38.1% chance of rates remaining unchanged.
- The US 10-year benchmark rate trades at 4.42%, slightly below the recent high of 4.50%.
US Dollar Index Technical Analysis: Settle Down Boy!
The US Dollar Index (DXY) has experienced market recalibration following President-elect Donald Trump’s victory and Republican control of Congress. Recent movements suggest a potential easing from the post-election highs.
Key levels to watch include the 107.00 round level, which saw a firm rejection last week. A fresh yearly high at 107.07 poses a resistance, with a breakout potentially targeting 107.35 for a two-year high.
Support levels are identified at 105.93 and 105.53, with the latter pivotal in preventing a downturn towards 104.00.
US Dollar Index: Daily Chart
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States and is widely traded globally. It holds a dominant position in foreign exchange markets, accounting for a significant portion of transactions daily. The value of the USD is influenced by the Federal Reserve’s monetary policy, which aims to maintain price stability and employment levels through interest rate adjustments.
Monetary tools such as quantitative easing (QE) and tightening (QT) can impact the USD value in extreme situations, with QE leading to a weaker Dollar and QT potentially strengthening it.