Author: Mr. Amar – Technical Analysts

Federal Reserve officials are helping to shape market expectations for steeper rate hikes to curb rising inflation but have failed to allay fears that the tightening cycle could tear a hole in the economy and jobs. As stated by the St. Louis Fed President James Bullard, the Fed needs to move aggressively to keep inflation under control. Bullard disagreed last week when the rest of his peers agreed to raise the fed funds rate by just a quarter of a point from the near-zero level it’s been at since March 2020.

The US Dollar Index (DXY) has entered a slightly wider range of 97.70 to 99.20 as investors anticipate a key trigger after last week’s announcement of a 25-basis point rate hike and 25 basis point delay wait, which could determine the direction of the dollar ceasefire between Russia and Ukraine. The Fed has announced seven rate hikes by the end of 2022, and aggressive tightening has already supported US Treasury yields, which will be the focus of Fed Chair Jerome Powell’s speech tonight. The speech will likely dictate the rate hike action plan. Powell argued that the economy was strong enough to withstand higher borrowing costs without hurting the job market, arguing that the best the Fed could do to ensure continued strength in the job market was to control inflation.

Technically, the US dollar remains in a short-term range that has been in play for much of March. There may even be a bearish bias starting to develop as lower highs come with horizontal support. This could eventually lead to a descending triangle pattern, which is often tackled by bearish breakouts. Such a setup would not necessarily negate the longer-term uptrend but could highlight a deeper pullback in this overall move.