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US Dollar Struggles Despite Fed Hawks Screeching for Hikes. Where to for the USD Index (DXY)?

US Dollar Struggles Despite Fed Hawks Screeching for Hikes. Where to for the USD Index (DXY)?

Daniel McCarthy, Strategist

US Dollar, DXY, USD, Crude Oil, Japanese Yen, Fed, AUD, CAD, NZD - Talking Points

  • The US Dollar has every reason to rally but remains stagnant
  • APAC equities were mostly up, firmer commodities boosted related currencies
  • Fed speak continues to lift Treasury yields.Will USD rise to the occasion?

The US Dollar continued to meander through Asia today even though several Federal Open Market Committee (FOMC) members are calling for an acceleration in the rate hike timeline.

On Tuesday, St. Louis Fed President James Bullard, San Francisco Fed President Mary Daly and Cleveland Fed President Loretta Mester, all echoed hawkish remarks made by Fed Chair Jerome Powell on Monday.

As a result, the market has lifted expectations for a faster pace of rate rises and the entire US Treasury yield curve has lifted off. At 2.40%, the benchmark 10-year note is now returning 21 basis points more than this time last week

This would normally be seen as constructive for the US Dollar, but it has only strengthened against the yield sensitive Japanese Yen.

The Yen is also susceptible to higher oil prices, which have rallied again today on concerns of further sanctions for Russian energy.

The currency hit another 6-year low and has once again helped to boost the export centric Nikkei 225 index, up over 2.5% today.

Other APAC equities are mostly in the green after a positive lead from Wall Street with the exception of Chinese mainland indices. They are pretty much flat on the day after another lockdown was announced.

Higher commodity prices have boosted their related currencies with AUD, CAD and NZD underpinned for now. The Sterling has also been gaining ahead of today’s UK CPI number.

Gold is relatively steady, near US$ 1,922 an ounce.

After the UK CPI this morning, the US will see data on mortgage applications and new home sales.

US President Joe Biden is heading to Europe for a series of talks and will kick it off with the NATO summit on Thursday.

The full economic calendar can be viewed here.

US Dollar Index (DXY) Technical Analysis

The US Dollar index (DXY) been in a tight range for the last 2-weeks as it pauses in an ascending trend.

The price is just below the short-term 10-day simple moving average (SMA) while remaining above the medium and long-term 55 and 100-day SMAs. This could suggest that short term bullish momentum has stalled but the underlying momentum remains intact for now.

A break on the topside of the range above potential resistance at 99.418 may see bullish momentum resume. Further resistance might be at early 2020 highs of 100.556 and 100.931.

On the downside, support could be at the recent low of 97.712 or pivot points at 97.802 and 97.441.

US DOLLAR CHART

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

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

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