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US Dollar Crunched Post Fed Hike as Oil and Gold Rip Apart. New DXY Index Low?

US Dollar Crunched Post Fed Hike as Oil and Gold Rip Apart. New DXY Index Low?


US Dollar, DXY Index, USD, Fed, FOMC, Crude Oil, Gold, Treasury Yields, AUD, NZD - Talking Points

  • US Dollar resumed weakening despite a higher target rate from the Fed
  • A 25 basis point hike to 5-5.25% appears to have stoked further fears of recession
  • If the market thinks the Fed is tightening, where does leave the DXY index??

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The US Dollar remains under the pump today after sliding into the New York close after the Federal Open Market Committee (FOMC) raised its target rate by 25 basis points to 5-5.25% yesterday

The weakness appeared to evolve out of perceptions that the Fed is done hiking with the interest rate market now pricing a cut in rates for the third quarter.

This is despite reassurance from Fed Chair Jerome Powell that each meeting going forward will be data-dependent and require ongoing assessment.

The March meeting statement read, “The Committee anticipates that some additional policy firming may be appropriate,” before going on to cite factors that will be weighed in decision-making.

The May meeting statement changed this passage to, “In determining the extent to which additional policy firming may be appropriate.”

It seems that the market is anticipating a recession, hence an impending easing of monetary conditions. If the slowdown does unfold that way but inflation persists well above the Fed’s 2% target, this could lay a rocky road ahead for the US economy.

The fallout of the FOMC meeting saw Treasury yields sink, helping to undermine the US Dollar. The largest losses were seen against the perceived haven currencies of the Suisse and Yen.

USD/CHF made a 15-month low near 0.8800 while the DXY (USD) index continues to languish near 2-year lows.

The Aussie and Kiwi Dollars are firmer after both currencies saw solid economic data. NZ building permits were up 7% month-on-month in March. Australia’s burgeoning trade surplus came in at AUD 15.27 billion for the month of March, the second-highest reading on record.

Wall Street finished its cash session lower, but futures are pointing toward a steady start today. APAC equity indices are mixed with Chinese markets open for the first time this week, but Japan remains closed.

On the opening to the Asian session, crude oil was smashed lower while gold roared higher at the same time. Both markets have since back to levels near where they were at the open.

WTI crude made a 17-month low at US$ 63.34 bbl which was more than 7% lower from the New York close just moments prior. The high in the front month COMEX gold futures contract fell just short of an all-time high, trading at 2,085.4 an ounce.

The full economic calendar can be viewed here.

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The DXY index remains within a descending trend channel and below all period daily simple moving averages (SMA) which may suggest that bearish momentum might be unfolding.

Support could be at previous lows of 100.82, 100.79, 99.57 and 99.42. On the topside, resistance might be at the prior peaks of 102.40, 102.81 and 103.06. The latter is also near the 55- and 100-day SMAs, which may lend resistance.


Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for

Please contact Daniel via @DanMcCarthyFX on Twitter

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