Author: Mr. Amar – Technical Analyst
The dollar pushed higher on Tuesday, as the violent snap back in US stocks in the second half of Monday’s trading failed to convince global markets that the recent volatility has run its course. Risk aversion was in evidence across equity and commodity markets in Asia and Europe, pushing DXY Index back toward a two-week high. The index, which tracks the greenback against a basket of developed market currencies, was up 0.1%
There are a lot of market expectations ahead of the FOMC’s meeting which concludes tomorrow. These are largely due to changing expectations over what the Fed might do. Some of it is, many analysts pulled forward their estimation that the Fed will hike rates in March. That also seems to be the consensus of the money markets.
The current pace of the taper means that by mid-March, the Fed will stop buying assets, and then almost immediately raise rates. For this reason, many analysts suggest that the way for Powell to take a hawkish stance without actually changing policy is to communicate that they will likely raise rates at the next meeting.
It can be said that US Dollar will remain bullish for the longer term, but for the near term, it will likely make some retracements towards the breakout points. And even when that zone is re-tested, will they have the ammunition to breakthrough? Likely, this will need some type of fundamental surprise to bring a break into play, and this can keep the top side of the USD capped for now.