- The US dollar index is negotiated after plunging a five -day hollow on Tuesday around 99.20.
- The headlines in China and the United States, whose officials are expected to meet this weekend in Switzerland, is pushing a sigh of relief.
- The US dollar index remains stuck in a waiting range while the decision of the Federal Reserve rate is looming.
THE US dollar Index (DXY), which follows the performance of the US dollar (USD) against six main currencies, is largely negotiated flat on Wednesday at around 99.40 after print a new five -day lower Tuesday and seems to be on a break for the moment. The merchants assess as to this time Federal reserve (Fed) Interest rate decision later this Wednesday. We do not know much about this rate decision, because the markets are almost fully price Nourished will guard price Stable despite the pressure from US President Donald Trump to cut them.
On the geopolitical front, tensions broke out between Pakistan and India. Pakistan said he had killed five Indian planes and made the soldiers in retaliation for Indian military strikes on Wednesday. The prospect of a war between nuclear weapons neighbors should see an influx of reflux in complete safety towards American obligations or gold, for example, although any request for additional paradise is, at this stage, to be canceled by the optimism of commercial talks, reports Bloomberg.
Daily Digest Market Movers: Fed is not going to bow for Washington
- The Secretary in the United States of the Treasury Scott Bessent and the representative of the United States, Jamieson Greer, will go to Switzerland for commercial discussions with the Chinese delegation, led by Deputy Prime Minister He Lifeng this weekend. The two parties seek to defuse a price dead end which threatened to hammer the two economies. In this first phase, no commercial interview as such will be held, but he only speaks to defuse the situation, according to Bessent on Fox News.
- At 6:00 p.m. GMT, the Fed rate decision will be published with a joint declaration. Expectations are for the Fed to maintain its policy rate at a range of 4.25% to 4.50%.
- At 6.30 p.m. GMT, the president of the Fed Powell will go on stage to comment on the recent policy rate decision and answer questions from journalists in the room.
- The actions are quite positive, although no real rally materializes. The gains are reduced to a minimum, with an advance of approximately 0.5% for European and American indices.
- The CME Fedwatch tool shows the chances of a drop in the interest rate by the federal reserve at the June meeting at 28.3%. Further on, the decision of July 30 sees the chances that the rates are lower than the current levels at 74.2%.
- American yields at 10 years are negotiated around 4.32%, stable for the moment after a four -day consecutive rally.
Technical analysis of the US dollar index: Big Break is starting to take shape
The US dollar index (DXY) does not move or does not really react to the surprise and communication of Chinese and American administrations on trade negotiations that should start on Saturday. The markets probably read the headlines quickly and behind the news that these talks should rather be considered as two desperate parties joining to see how to attenuate the impacts on the economy. It also shows how American economic performance probably starts to fight because it lacks Chinese supplies, which could filter in another leg lower in the Dxy once American economic data confirms it.
Uplining, the first resistance of the DXY is 100.22, which supported the index in September 2024, with a rupture above the round level of 100.00 as a Haussier signal. A firm recovery would be a return to 101.90, which acted as a central level throughout December 2023 and again as a basis for the reverse head and shoulder formation (H&S) during the summer of 2024.
On the other hand, support 97.73 could quickly be tested on any substantial downside. Further below, relatively thin technical support is available at 96.94 before looking at the lower levels of this new price range. It would be 95.25 and 94.56, which means fresh stockings that we have not seen since 2022.
US dollar index: daily graphic
FAQ Nourished
In the United States, monetary policy is shaped by the Federal Reserve (Fed). The Fed has two mandates: reach price stability and promote full employment. Its main tool to achieve these objectives is to adjust interest rates. When prices are increasing too quickly and inflation is greater than the 2% target of the Fed, it increases interest rates, increasing borrowing costs throughout the economy. The result is a stronger US dollar (USD) because it makes the United States a more attractive place for international investors to park their money. When inflation falls below 2% or the unemployment rate is too high, the Fed can reduce interest rates to encourage the loan, which weighs on the greenback.
The Federal Reserve (Fed) organizes eight political meetings per year, where the Federal Open Market Committee (FOMC) assesses the economic conditions and makes monetary policy decisions. The FOMC is assisted by twelve officials of the Fed – the seven members of the Council of Governors, the president of the Federal Reserve Bank of New York and four of the eleven presidents of the remaining regional reserve bank, who have a period of one year on a rotating basis.
In extreme situations, the federal reserve can use a policy called quantitative relaxation (QE). QE is the process by which the Fed considerably increases the credit flow in a stuck financial system. It is a non -standard political measure used during crises or when inflation is extremely low. It was the Fed's weapon of choice during the great financial crisis in 2008. It implies the Fed Print more dollars and use them to buy high -level bonds from financial institutions. QE generally weakens the US dollar.
The quantitative tightening (QT) is the opposite process of the QE, by which the federal reserve ceases to buy obligations from financial institutions and does not reinvest the principal of the obligations it holds at maturity, to buy new obligations. It is generally positive for the value of the US dollar.
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