- Analytics
- News and Tools
- Market News
- US Dollar Index veers away from 20-day SMA amid BoJ rate hike talk, Jobless Claims
US Dollar Index veers away from 20-day SMA amid BoJ rate hike talk, Jobless Claims
- The DXY Index trades with significant losses on Thursday, remaining below the 20-day SMA near 103.30.
- Speculation emerges for a policy pivot by the BoJ after Ueda’s comments drive demand away from the USD to the JPY.
- Investors gear up for US Nonfarm Payrolls data on Friday.
The US Dollar (USD) has been navigating turbulent waters, trading at 103.30, with significant losses registered below the 20-day Simple Moving Average (SMA). The primary drivers pushing down the Greenback include the Bank of Japan's rate hike discussions and failure to capitalize on the positive Initial Jobless Claims for the week ending December 1.
Alongside cooling inflation, mixed labor market conditions fuel cautious optimism within the Federal Reserve (Fed), which nonetheless hints at the need for further tightening in case data justifies it. High expectations are set for the upcoming labor market data release on Friday that will shape market expectations and set the pace of USD price dynamics.
Daily Market Movers: US Dollar Index trades lower near 103.00 on BoJ rate hike talk, eyes on NFPs
- The DXY Index has seen losses, with the US Dollar broadly trading below the 20-day SMA near 103.30.
- The US Initial Jobless Claims for the week ending December 1, reported by the US Department of Labor, came out at 220K. This is slightly below the market consensus of 222K.
- Investors await a host of economic activity reports due on Friday. These include Average Hourly Earnings for November on a yearly and monthly basis, as well as the Unemployment Rate and Nonfarm Payrolls data for November.
- US bond yields are down across the board, with the 2-year yield at 4.60%, while both the 5-year and 10-year yields stand at 4.12%.
- According to the CME FedWatch Tool, the market is not pricing in a hike for the December meeting. Meanwhile, rate cuts are being expected by mid-2024.
- Regarding Bank of Japan (BoJ) Governor Ueda’s comments, the central bank explored the possibility of leaving the negative interest rate policy. He added that there are various options when the tightening cycle begins that have boosted hawkish bets on the bank, benefiting the JPY and driving demand away from the USD.
Technical Analysis: US Dollar momentum flattens, DXY loses 20-day SMA
The Relative Strength Index (RSI) is currently on a flat slope in negative territory, while the Moving Average Convergence Divergence (MACD) prints flat green bars, suggesting that the bulls are losing traction.
However, exploring the position of the DXY relating to its 20, 100 and 200-day Simple Moving Averages (SMAs), it is evident that the outlook favors buyers on the long-term trend but the sellers in the short term. As long as the index doesn’t consolidate above the 20-day SMA, more downside may be in play to retest the 200-day SMA at 103.60.
Support levels: 103.20, 103.15, 103.00.
Resistance levels:104.00 (20-day SMA), 104.40 (100-day SMA), 104.50.
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
