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US Dollar Finds Firmer Footing After Fed Clarification. Has the DXY Index Peaked?

US Dollar Finds Firmer Footing After Fed Clarification. Has the DXY Index Peaked?

Daniel McCarthy, Strategist

US Dollar, Federal Reserve, Waller, GBP, CHF, CCP, Bali G-20 - Talking Points

  • The US Dollar steadied today after last week’s carnage
  • The Fed’s Waller reminded markets of the inflation fight
  • If China re-opens, will that re-ignite price pressures?

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The US Dollar recovered some of last week’s losses to start the week after Federal Reserve Governor Chris Waller re-iterated that he thought the Fed isn’t done with its hawkishness.

In comments made on Sunday, he said, “we’ve got a long, long way to go to get inflation down. Rates are going keep going up and they are going to stay high for a while until we see this inflation get down closer to our target.”

That target is somewhere close to 2% rather than the latest read of 7.7%.

He also highlighted that last Thursday’s softish US CPI number was only one data point. Several of his fellow board members have made this observation previously.

The British Pound and Swiss Franc have been the underperformers against the US Dollar today. Both are down around 0.50% going into European trade.

APAC equities were mixed, with Australia and Japan indices sliding slightly but China and Hong Kong bourses putting on solid gains.

This came after hints of a policy shift from the Chinese Communist Party toward Covid-19-related restrictions and support for the ailing property sector. Futures are pointing toward a soft start to the Wall Street cash session.

Cryptocurrencies continue to face scrutiny after some questions were raised about potential illegal withdrawals from FTX before its demise. Bitcoin is eyeing off last week’s low at 14925.

Crude oil is steady, with the WTI futures contract holding above US$ 89 bbl while the Brent contract is a touch above US$ 96 bbl. Gold is a bit softer, trading near US$ 1670 at the time of going to print.

Data is a bit light on for the Monday session, with Swiss industrial production being the highlight.

US President Joe Biden is anticipated to be meeting with Chinese President Xi Jinping later today ahead of the G-20 summit kicking off tomorrow. More broadly, it appears likely that the focus will be on any commentary on the relationship between China and Russia with the Western world.

The full economic calendar can be viewed here.

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DXY (USD) INDEX TECHNICAL ANALYSIS

The DXY Index snapped below a long-term ascending trend line that could potentially indicate that the bullish run has concluded for now.

Support may lie at the lows seen in June and August at 103.42, 103.67 and 104.64.

On the topside, resistance might be offered at the breakpoints of 107.43 and 107.68.

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Chart created in TradingView

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

Please contact Daniel via @DanMcCathyFX on Twitter

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

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