Dollar Rallies on Hawkish Fed Speak
Hawkish Fed Commentary
The US Dollar is pushing firmly higher today, with bullish sentiment strengthened by hawkish Fed commentary yesterday. Chicago Fed President Goolsbee said yesterday that he sees risks of inflation remaining elevated against a backdrop of heightened supply shock risks and increased spending linked to AI investment. As such he signalled that further tightening would likely be necessary with a further .25% hike this year quite probable. While not a voter in the committee his views are often seen as a gauge of how sentiment sits within the Fed. We also heard from St Lous Fed President Musalem who shared his view that front-loaded gradual tightening is the best course of action for the Fed. Today we’ll hear from Fed’s Williams and Jefferson with USD vulnerable to a continued move higher if we hear any further hawkish sentiment shared.
USD/Oil Link Breaking Down
Hawkish Fed commentary has helped buffer the US Dollar against the decline in oil prices and the rising optimism around a possible end to the US/Iran war. USD had been tracking the moves in oil prices with oil price direction used as a rough proxy for gauging likely Fed action given its impact on inflation expectations.
What to Watch
Looking ahead this week, US PMIs, a raft of Fed speakers and durable goods, UoM data on Friday will be the key inputs to watch. Traders will also be monitoring headlines around the UN meeting in New York as well as Trump’s side-line meetings with Xi and Gulf leaders.
Technical Views
DXY
The rally in DXY has seen the index breaking back above the 100.18 level and back above the broken bull channel lows. While above this area, focus is on a continued push higher, in line with bullish momentum studies readings. If we dip back below the 100.18 level, 99.15 is the key support to watch.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% and 73% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.