- The US dollar index falls and reached a minimum of 99.30 before the Fed political meeting.
- The 10 -year treasure yield remains stable at 4.35%, investors await Fed's decision.
- President Trump reports commercial transactions, but does not offer any concrete details.
The US dollar index (DXY), which measures the value of the US dollar (USD) compared to a currency basket, remained under sales pressure on Tuesday while investors become defensive before the monetary policy decision of the Federal Reserve (Fed). The markets have also reacted to the ambiguity of trade policies and to a renewed force in Asian currencies.
Daily Digest Market Movers: US Dollar pressed by Fed Award and Asia Flows
- The yields of the US Treasury remained flat at 4.35%, even though the Treasury is preparing at auction $ 39 billion in 10 -year tickets, indicating the appetite of the silent market.
- US Secretary of the Treasury, Scott Bessent, said that commercial talks with 17 partners are active, but no commitment has occurred with China, fueling speculation.
- Commerce secretary Howard Lungick added pressure for a major trade agreement, saying that the first agreement must be with a “top ten” economy.
- The recent increase in Taiwan Dollar continues to influence FX flows in Asia, Singapore dollar and Malaysian ringgit are also strengthened.
- Trump reiterated that if certain commercial transactions could be signed soon, no country should conclude an agreement under current conditions.
- The Swaps market now predicts the reduction in the first Fed decrease in July, with two other 25 -point reductions expected by the end of the year.
- The Trump administration denied the intention to renegotiate the USMCA, calling it a “good deal”, while reaffirming policies in the protectionist automotive sector.
- The Fed President's press conference Jerome Powell after Wednesday's meeting could define the next policy decision, the markets monitoring the dominant clues.
- US officials say that announcements to come may not focus on trade, suggesting a wider communication strategy before Trump's trip.
- The Asian FX force suggests that regional savings can tolerate the appreciation of facilitating trade tensions, diverging historical depreciation standards.
Technical analysis of the US dollar index: to switch your toes
The US dollar index (DXY) is negotiated around 99.46, down 0.32% during the day, showing a lower bias. Price action varies between 99.26 and 100.10. While the relative resistance index (RSI) is 39.41 (neutral), the divergence of Mobile Average Convergence (MacD) indicates a purchase signal. The power of the bull bear (-0.35) and the ultimate oscillator (49.76) are both neutral. Key sms at 99.94 (20 days), 105.31 (100 days) and 104.37 (200 days) show a lower feeling. Resistance is observed at 99.73 and 99.59 (EMA and SMA 10 days), without any confirmed clear support.
US dollar FAQ
The US dollar (USD) is the official currency of the United States of America and the “de facto” currency of a large number of other countries where it is in circulation alongside local tickets. It is the most negotiated currency in the world, representing more than 88% of all global turnover, an average of 6.6 billions of dollars of transactions per day, according to data from 2022. After the Second World War, the USD took over from the British book as a global reserve currency. For most of its history, the US dollar was supported by gold, until the Bretton Woods agreement in 1971 when the Order stallion left.
The single most important factor on the value of the US dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to reach price stability (controlling inflation) and promoting full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices are increasing too quickly and inflation is greater than the 2% target of the Fed, the Fed will increase rates, which helps the USD value. When inflation falls below 2% or the unemployment rate is too high, the Fed can reduce interest rates, which weighs on the greenback.
In extreme situations, the federal reserve can also print more dollars and promulgate a quantitative relaxation (QE). QE is the process by which the Fed considerably increases the credit flow in a blocked financial system. This is a non -standard political measure used when credit has dried up because the banks will not lend themselves (by default of the fear of the counterpart). This is a last appeal when the simple drop in interest rates is unlikely to achieve the necessary result. It was Fed's weapon of choice to combat the credit crisis that occurred during the great financial crisis in 2008. It implies the Fed Print more dollars and use them to buy US state bonds mainly from financial institutions. QE usually leads to a lower US dollar.
The quantitative tightening (QT) is the opposite process by which the federal reserve ceases to buy obligations from financial institutions and does not reinvest the principal of the obligations it holds in new purchases. It is generally positive for the US dollar.
