News & Analysis at your fingertips.

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. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • Further your forex knowledge and gain insights from our expert analysts @JohnKicklighter and @JStanleyFX on $USD with our free Q4 market analysis guide, available for free today. https://t.co/7G7pWntiyY #DailyFXGuides https://t.co/XYCRng3hEW
  • RT @JournalistRoss: From CNN's @mkraju: The goal among Democratic leaders is to have a vote Wednesday or Thursday on the infrastructure pac…
  • *Reminder: Weekly Strategy Webinar tomorrow at 8:30am ET on @DailyFX !! https://t.co/lxd5fZnn4H
  • Greed is a natural human emotion that affects individuals to varying degrees. Unfortunately, when viewed in the context of trading, greed has proven to be a hindrance more often than it has assisted traders. Learn how to control greed in trading here: https://t.co/kODPAfJE79 https://t.co/L15w1dzclc
  • Wow Liverpool... https://t.co/9Mx6Xmw4iS
  • With the $SPX, Bitcoin and Fed 2022 rate forecasts pushing record highs; the heavy economic docket for the coming week will make for some loaded trading potential. The events and markets I'm looking at ahead: https://www.dailyfx.com/forex/video/daily_news_report/2021/10/23/SP-500-Reversal-ECB-Decision-FAANG-Earnings-Top-Volatility-Themes-Next-Week.html https://t.co/1SGirtalSb
  • GDP (Gross Domestic Product) economic data is deemed highly significant in the forex market. GDP figures are used as an indicator by fundamentalists to gauge the overall health and potential growth of a country. Learn use GDP data to your advantage here: https://t.co/Yl9vM7kO6a https://t.co/wdbXlx7ChB
  • Further your stock trading knowledge and gain informed market analyses from our expert analysts @HathornSabin and @JMcQueenFX on Indexes with our free Q4 guide, available today.https://t.co/YQG1aaIT8C #Dailyfxguides https://t.co/qqYNi1RA2F
  • The continuity seen across these volatility cycles is a good thing. Historical precedence offer a blueprint for identifying conditions supportive for a vol-event to occur, and how they may unfold. Deepen your knowledge of historical volatility here: https://t.co/ZnyMVSjd2b https://t.co/1bNvAWr7Yy
  • US equities back to record highs, but inflation concerns remain. FTSE eyeing EU-UK spat. Get your weekly equities outlook from @JMcQueenFX here: https://t.co/W5TUhVJ1YZ https://t.co/tQdkW5ysQD
US Dollar Remains Biased Lower Before Tomorrow's FOMC Meeting

US Dollar Remains Biased Lower Before Tomorrow's FOMC Meeting

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- The Federal Reserve will hike rates 25-bps tomorrow, but given that the event is 100% priced in per Fed funds futures, the US Dollar needs something else to spark a rebound.

- The technical structure for the US Dollar is pointing lower in the near-term amid a strengthening bearish momentum profile.

- Retail trader sentiment towards the US Dollar is now bearish as traders sell rallies in EUR/USD and GBP/USD.

See our longer-term forecasts for the US Dollar, Euro, British Pound and more with the DailyFX Trading Guides

The US Dollar (via the DXY Index) is trading lower following the daily hammer established yesterday, which hinted at a possible rebound. Alas, with the DXY Index falling back after another test of resistance at the late-August lows, losses are once again taking shape. It's worth noting that the drop in the US Dollar is occuring while the US Treasury 10-year yield moved up past 3.100%, a fresh yearly high.

For US Dollar traders, nothing is more important over the next day than what happens at tomorrow's Federal Reserve policy meeting. It is essentially universally accepted that the FOMC will hike rates by at least 25-bps tomorrow, with some taking the precocious stance that a 50-bps hike will materialize. Fed funds peg the odds of a 25-bps hike tomorrow at 100%, with a 2.1% chance of a 50-bps hike.

There are a few things to consider about current market pricing. At a minimum, a 25-bps rate hike will not help lift the US Dollar; it is already priced in. Because there is a small chance of a 50-bps hike, the fact that this won't materialize will take some wind out of the US Dollar's sails.

To this end, it doesn't seem likely that the excessive optimism about a 50-bps hike will result in expectations for the Fed's December meeting (the next time a new Summary of Economic Projections is released) to increase. After all, there is already a 72% chance of a fourth and final 25-bps hike priced in for December. Accordingly, this leaves the US Dollar in a 'buy the rumor, sell the news' type of situation, even if the buck hasn't been bid up beforehand.

DXY Index Price Chart: Daily Timeframe (January to September 2018) (Chart 1)

US Dollar Remains Biased Lower Before Tomorrow's FOMC Meeting

If the fundamental bias for the US Dollar is bearish, then it is complementing an already bearish technical structure that's emerged in recent days. The DXY Index has continued to hold below the late-August swing low near 94.43; today would be the fourth consecutive close below. Price remains below its daily 8-, 13-, and 21-EMA envelope, while both daily MACD and Slow Stochastics continue to trend lower in bearish territory.

The outlook for the US Dollar will remain bearish over the coming days until 94.43 is retaken by the end of this week, which would constitute a reversal through both the daily 8- and 13-EMAs, the late-August swing low, and the descending trendline off of the August and September highs.

Read more: FX Week Ahead: FOMC & RBNZ Rate Decisions, EZ CPI, Canadian GDP

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

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

Follow him on Twitter at @CVecchioFX

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

DISCLOSURES