- Analytics
- News and Tools
- Market News
- US Dollar looks set for ninth consecutive week of gains
US Dollar looks set for ninth consecutive week of gains
- The US Dollar flattens on Friday as investors take profits after its rally on Thursday.
- Traders are letting the dust settle on the lacklustre performance of the Euro after ECB’s dovish hike.
- The US Dollar Index is above 105.00, though faces some profit taking ahead of the weekend.
The US Dollar (USD) got the wind in its sales after a very volatile afternoon on Thursday had faith falling in favor of the Greenback. A dovish hike from the European Central Bank prompted traders to sell the Euro in the conviction the Eurozone economy will crash. Meanwhile, Retail Sales data out of the US and Producer Price Index numbers signalled that the US economy looks to head for that soft landing.
The Greenback will need to perform on its own this Friday as already in early morning trading some profit taking is happening ahead of the weekend. The University of Michigan Consumer Sentiment print will determine whether the US Dollar Index (DXY), which tracks the value of the USD against a basket of currencies, will close below or above 105.00. Another weekly positive close for the US Dollar hangs in the balance, with chances that the DXY will close in green for a ninth straight week.
Daily digest: US Dollar faces profit taking ahead of Michigan Sentiment
- Plenty of datapoints to process on Friday. At 12:30 GMT, the Import and Export Price Indexes for August are due, both monthly and yearly prints. The Export Price Index is expected to increase 0.3% on month in August, less than the 0.7% rise seen in July. . The yearly index decreased by 7.9% in July and there is no no forecast for the upcoming August reading. The Import Price Index is expected to slow to 0.3% on month from 0.4%. The yearly reading decreased 4.4% in July and there’s no market forecast for August..
- Also at 12:30 GMT, the New York’s Fed Empire State Manufacturing Index for September is due to come out. Expectations are still for a negative print, though less negative, from -19 to -10.
- At 13:15 GMT, markets will digest Industrial Production data from August, which is expected to increase by a marginal 0.1%, slowing sharply from the 1% rise seen in July.
- Focal point for this Friday comes in at 14:00 GMT with the Michigan Consumer Sentiment Index and the 5-year Consumer Inflation Expectations. The preliminary Consumer Sentiment Index for September is expected to head from 69.5 to 69.1. No forecast on the five-year inflation expectations component, which were at 3% at the end of August..
- Equities are in the green across the board with both the most important Asian and European indices all up near 1%. US equity futures are lagging a touch, and are all up by 0.20%.
- The CME Group FedWatch Tool shows that markets are pricing in a 97% chance that the Federal Reserve will keep interest rates unchanged at its meeting in September after the recent PPI and Retail Sales numbers.
- The benchmark 10-year US Treasury bond yield trades at 4.30%, substantially higher to where it was at the beginning of the week.
US Dollar Index technical analysis: On its own
The Greenback had a double jetpack strapped on Thursday. One element that boosted the US Dollar was the macroeconomic front, with the solid US Retail Sales data, lower Jobless Claims both initial and continuing, and PPI numbers confirming the Fed is on the right track. The second jetpack came from the depreciating Euro, which got hammered after a European Central Bank meeting where Lagarde refrained to answer several simple questions, leaving traders behind with not much belief or elements to support the Euro.
The US Dollar Index (DXY) has edged up, reaching as high as 105.41. This is just a sigh away from the 2023 high near 105.88. Should the DXY be able to close above there for the week, expect King Dollar to go even stronger in the medium-turn.
On the downside, the 104.44 level seen on August 25 kept the Index supported on Monday, not allowing the DXY to sell off any further.. Should the uptick that started on Tuesday reverse and 104.44 gives way, a substantial downturn could take place to 103.04, where the 200-day SMA comes into play for support.
US Dollar FAQs
What is the US Dollar?
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
How do the decisions of the Federal Reserve impact the US Dollar?
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
What is Quantitative Easing and how does it influence the US Dollar?
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
What is Quantitative Tightening and how does it influence the US Dollar?
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
© 2000-2024. All rights reserved.
This site is managed by Teletrade D.J. LLC 2351 LLC 2022 (Euro House, Richmond Hill Road, Kingstown, VC0100, St. Vincent and the Grenadines).
The information on this website is for informational purposes only and does not constitute any investment advice.
The company does not serve or provide services to customers who are residents of the US, Canada, Iran, The Democratic People's Republic of Korea, Yemen and FATF blacklisted countries.
Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.
Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.
Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.
Bank transfers
