- The US Dollar Index (DXY) rose slightly to 105.70.
- Jobless claims for the first week of Nov. 3 were lower than expected.
- The Fed’s Barkin made hawkish comments during the session. Still, bets on an interest rate hike in December are low.
The US Dollar (USD) is posting gains against its rivals on Thursday, with the DXY index rising to 105.70. Dollar price dynamics were marked by strong jobless claims data and rising US bond yields, which appear to be limiting the decline in the USD. All eyes are now focused on next week’s Inflation, which could dictate the direction of the US dollar in the short term.
Markets remain quiet this week as investors wait for new catalysts to place their bets on the next Federal Reserve (Fed) decision in December. Several officials were on the wires Monday and Tuesday, but did not provide any notable information. Attention appears to have focused on next week’s US October inflation figures. On Wednesday, Thomas Barkin commented that he was not satisfied with the current inflation outlook, commenting that the job is not done.
Daily Market Moves Summary: US Dollar Struggles to Gain Momentum Despite Fed Hawks’ Rhetoric
- The Dollar Index remains with slight gains at 105.70, with the bulls struggling to make a significant move.
- No relevant report will be published this week. Markets are awaiting next week’s US inflation numbers and are still digesting last Friday’s US non-farm payrolls report.
- Initial jobless claims for the week ending Nov. 3 came in at 217,000, below the expected 218,000, and fell from their last reading of 220,000.
- In reaction, the 2-year Treasury rate rose to 4.96%, while the longer-term 5- and 10-year rates rose to 4.55%, which appears to limit the fall of the Dollar.
- Investors remain on the sidelines, waiting for high-level reports to continue placing their bets on the Fed’s next decision.
- According to CME’s FedWatch tool, the odds of a 25 basis point hike in December are extremely low, below 10%.
Technical Analysis: Dollar Index momentum flattens, bears point lower
Based on the daily chart, the technical outlook for the US Dollar Index (DXY) remains neutral to bearish as the bulls struggle to gain momentum and the bears are just around the corner. Sloping flat below its midline, the Relative Strength Index (RSI) suggests a period of stability in negative territory, while the Moving Average Convergence (MACD) shows stagnant red bars.
What gives neutrality to the outlook is that the index remains below the 20-day SMA, but above the 100-day and 200-day SMA, indicating that the bulls still have the upper hand. the handle in the big picture. As long as the bears manage to keep the index below this level, the DXY will remain vulnerable to the downside.
Support levels: 105.50, 105.30, 105.00.
Resistance levels: 105.80, 106.00, 106.10 (20-day SMA).
US Dollar FAQ
What is the US Dollar?
The United States Dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation alongside local banknotes. According to 2022 data, it is the most traded currency in the world, with more than 88% of all global currency exchange operations, equivalent to an average of $6.6 trillion in daily transactions.
After World War II, the USD took over from the pound sterling as the world’s reserve currency. For most of its history, the US dollar was backed by gold, until the Bretton Woods Agreement of 1971.
How do the decisions of the Federal Reserve affect the Dollar?
The single most important factor influencing the value of the US Dollar is monetary policy, which is determined by the Federal Reserve (Fed). The Fed has two mandates: achieve price stability (control inflation) and promote full employment. Your main tool to achieve these two objectives is to adjust interest rates.
When prices rise too quickly and inflation exceeds the 2% target set by the Fed, it raises rates, which favors the price of the Dollar. When Inflation falls below 2% or the Unemployment Rate is too high, the Fed can lower interest rates, which weighs on the Dollar.
What is Quantitative Easing and how does it influence the Dollar?
In extreme situations, the Federal Reserve can also print more dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a clogged financial system.
This is an unconventional policy measure used when credit has dried up because banks do not lend to each other (for fear of counterparty default). It is a last resort when a simple lowering of interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy US government bonds, primarily from financial institutions. QE usually leads to a weakening of the US dollar.
What is quantitative tightening and how does it influence the US dollar?
Quantitative tightening (QT) is the reverse process by which the Federal Reserve stops buying bonds from financial institutions and does not reinvest the capital of the bonds it has in its portfolio in new purchases. It is usually positive for the USD.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
