We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Bullish
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • Negative yielding government bonds – What are they telling us? Find out from @nickcawley1 here: https://t.co/F6JuhmrvPT https://t.co/KdpSjQSJ8F
  • #Euro area stocks may be preparing to break the four-month uptrend built around hopes for a US-China trade deal and an orderly #Brexit outcome. Get your market update from @IlyaSpivak here: https://t.co/ujlCJiXLvh https://t.co/INdFtsrTTF
  • What is the top market moving theme for the coming week? I disagree with the majority. '$EURUSD, $GBPUSD and $AUDUSD Top Volatility Candidates With #Fed, #Election, #TradeWar' https://www.dailyfx.com/forex/video/daily_news_report/2019/12/07/EURUSD-GBPUSD-and-AUDUSD-Top-Volatility-Candidates-On-Fed-Election-Trade-War.html?CHID=9&QPID=917719 https://t.co/Q1dbZVN5Us
  • The Australian Dollar was focused on its home country in the past week, but that is likely to change sharply in the days ahead with major global risk events coming up. Get your $AUDUSD market update from @DavidCottleFX here: https://t.co/yZz3hCyVMx https://t.co/1xw1JHwd7l
  • The #Euro broke chart resistance, threatening to challenge the bounds of its longer -term downtrend against the $USD. Bulls may find it premature to celebrate however. Get your market update from @IlyaSpivak here: https://t.co/VfR13llYbW https://t.co/LiWTvIygxc
  • The $USD appears to be stalling against the Singapore Dollar, Malaysian Ringgit, Indonesian Rupiah and Philippine Peso, but technical analysis may still favor USD strength. Get your market update from @ddubrovskyFX here:https://t.co/AZp98MoXKo https://t.co/jgZMUFVGJB
  • The Indian Rupee soared after the Reserve Bank of India surprised with a rate hold. $USDINR may climb as support reinstates the uptrend ahead of Indian CPI and global trade tensions. Get your market update from @ddubrovskyFX here:https://t.co/QEOabsDfMn https://t.co/rqn8Zjrvkv
  • #Gold closed lower after paring early-week gains post-NFP on Friday. But will price finally break support? These are levels that matter on the $XAUUSD weekly chart. Get your $gld technical analysis from @MBForex here: https://t.co/RILBGhLAQZ https://t.co/q5znMUlEQA
  • German Bund Yields Update: 2-Year: -0.639% 3-Year: -0.651% 5-Year: -0.548% 7-Year: -0.480% 10-Year: -0.290% 30-Year: 0.228%
  • The $AUD erased half of November’s down move in a mere two days but the dominant trend bias continues to favor weakness ahead. Get your market update from @IlyaSpivak here:https://t.co/ShYksfNXyS https://t.co/OVhyNgLRn5
DXY Index Clears February Highs as March Hike Odds Surge

DXY Index Clears February Highs as March Hike Odds Surge

2017-03-01 12:40:00
Christopher Vecchio, CFA, Sr. Currency Strategist
Share:

Talking Points

- US President Trump checks all the boxes markets were looking for, mainly infrastructure spending and tax cuts.

- Consistent hawkish commentary from Fed speakers past 24-hours raises specter of a hike this month - Fed funds now pricing in 80% chance.

- Positioning in USD/JPY is nearing a turning point, which would be a positive development for a broader DXY Index rally.

Between several hawkish comments from Fed policymakers and markets hearing everything they needed to in the US president's address to a joint session of Congress, the odds of a March rate hike have surged. In turn, with short-term US yields shooting up, the US Dollar Index (DXY) has been quick to take out the February high set on February 15.

Chart 1: DXY Index & US 2-year Yield 4-hour Timeframe (January 9 to March 1, 2017)

DXY Index Clears February Highs as March Hike Odds Surge

In the past 48-hours, we've heard from the Fed's Kaplan, Williams, Bullard, and Dudley, all of whom have painted a clear picture that a March rate hike is not merely an outside threat, but a very real possibility, thanks to the economy being at "full employment" and inflation (both headline and core) pushing through the Fed's medium-term target of +2%.

Confirming the need for higher rates, at least in the FX and rates markets' minds, was the speech given by US President Donald Trump last night. While details were still lacking, it's clear that there are specific policy goals that the 45th President of the United States intends to accomplish in order to boost US growth: a $1 trillion infrastructure spending program, funded by both public and private sources; and a tax reform plan that would cut taxes for both consumers and businesses, in what was a vague endorsement of a border-adjustment tax scheme.

As per the Mundell-Fleming framework (or IS-LM-BOP model), given the United States' high capital mobility, loose fiscal policy should lead to a rise in inflationary pressures, which in turn should necessitate tighter monetary policy from the Federal Reserve. Indeed, markets have gravitated towards this point of view, with the odds of a March rate hike surging up to 80% today thanks to the commentary from Fed officials and speech from US President Trump. Markets are now pricing in hikes in March and September, with north of a 50% chance of a third hike this year in December.

The factors that drove the US Dollar higher, US Treasury yields higher, and US equity markets higher in the immediate wake of the November 8 election - what constitutes the "Trump reflation trade" - seem to be very much back in play.

See the above video for technical considerations in DXY Index, AUD/USD, EUR/USD, USD/CAD, AUD/JPY, USD/JPY, and Crude Oil.

Webinar Schedule for Week of February 26 to March 3, 2017

Monday, 7:30 EST/12:30 GMT: FX Week Ahead: Strategy for Major Event Risk

Wednesday, 6:00 EST/11:00 GMT: Trading Q&A

Thursday, 7:30 EST/12:30 GMT: Central Bank Weekly

Read more: Stacked US Economic Calendar, Trump ’SOTU’ has DXY on Edge

--- Written by Christopher Vecchio, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher's e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.