- Analytics
- News and Tools
- Market News
- US Dollar just a sigh away from ending the week in the green
US Dollar just a sigh away from ending the week in the green
- The Greenback trades a touch softer after its firm move up on Thursday.
- US traders are set to hear from US Fed Chairman Powell ahead of the blackout period.
- The US Dollar Index is steady above 103 and just a sigh away from ending the week in the green.
The US Dollar (USD) bulls have made a staggering comeback this week. At one point the US Dollar Index (DXY) was even trading in the green on the weekly time frame. The main driver is the rate differential between the US and the rest of the world. This got a bit bigger again after the recent plunge in US rates. These too recovered this week.
On the economic front, two main elements could still add some US Dollar strength to this week's move. The first is a speech from US Federal Reserve Chairman Jerome Powell right at the end of this trading day and the second a different set of numbers from the Institute of Supply Management. Should both elements turn out in favour of the Greenback, expect to possibly even see a close above 104 this evening at the US closing bell.
Daily digest: Powell to choose sides
- Around 14:45 GMT the day kicks off with the S&P Global Purchase Manufacturing Index (PMI) for Manufacturing. Previous was at 49.4, a stand still is expected.
- Near 15:00 GMT this week’s last batch of data will be released:
- Construstruction Spending for the month is due to come out: Previous was at 0.4% and it is expected to remain unchanged.
- The Institute for Supply Management (ISM) will release its figures with the Employment Index for November: Previous was at 46.8 and forecast is for 47.2.
- ISM Manufacturing New Orders Index is expected to head from 45.5 to 46.7.
- ISM Manufacturing PMI will rise from 46.7 to 47.6.
- ISM Manufacturing Prices Paid is to soar from 45.1 to 46.2.
- Fed speakers this Friday as it is the last moment before the blackout period ahead of the last Fed rate decision for 2023.
- Austan Goolsbee from the Chicago Fed is due to speak nar 15:00 GMT.
- Fed Chairman Jerome Powell is due to speak nar 16:00 GMT.
- Chairman Powell will speak again at 19:00 GMT.
- Lastly Lisa Cook from the Fed’s board of governors will speak as well around 19:00 GMT.
- Right at the end of this Thursday, the US Treasury is heading to markets to allocate a 4-week bill.
- Equities are sliding lower with the Hang Seng having a very bad week this week: again down over 1%. European and US equities are mildly in the green.
- The CME Group’s FedWatch Tool shows that markets are pricing in a 99.4% chance that the Federal Reserve will keep interest rates unchanged at its meeting in December.
- The benchmark 10-year US Treasury Note trades at 4.31%, and steady off this week’s low.
US Dollar Index technical analysis: flipping over
The US Dollar is holding good cards here to take the upper hand this week and end its losing streak. US Fed Chairman Jerome Powell will need to choose if he backs the dovish comments from Fed’s Governor Christopher Waller, or sticks with the steady-for-longer view from San Francisco Fed’s Mary Daly. The latter could be enough to shoot the US Dollar Index (DXY) back above 104.
The DXY is making its way up towards the 200-day Simple Moving Average (SMA), which is near 103.58. The DXY could still make it through there, should Powell comments be enough for another push higher. A two-tiered pattern of a daily close lower followed by an opening higher would quickly see the DXY back above 104.28, with the 200-day and 100-day SMA turned over to support levels.
To the downside, historic levels from August are coming into play, when the Greenback summer rally took place. The lows of June make sense to look for some support, near 101.92, just below 102. Should more events take place that initiate further declines in US rates, expect to see a near full unwind of the 2023 summer rally, heading to 100.82, followed by 100.00 and 99.41.
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
