The DXY is currently testing the 50-day MA which has switched from a support to a resistance, sitting around 105.766. A break back above the 50-day MA will be a very bullish sign.
In terms of support, a break below the support range between 104.400 and 104.725.
Fundamentals for the dollar for the remainder of the 4Q2023:
There were no surprises with the Federal Reserve’s decision to leave the federal funds rate unchanged at 5.50% but the dovish tone from Fed chair Jerome Powell put wind in the sails behind risk-on investor sentiment. The risk-on sentiment was further supported by the weaker than expected US non-farm payrolls report which dropped to 150 thousand in October, down from 297 thousand in September. Any weaker than expected US economic data prints going forward will deem as evidence of the effect that the current rate hiking cycle has had on slowing down the US economy. As the evidence mounts for the results of the Fed’s current policy, the more the markets will price in the end of the interest hiking cycle and possible rate cuts over the near-term. This decision matrix will be the main driving force behind the market sentiment in the 4Q2023.
These were the key remarks from Fed chair Powell that sparked the risk-on sentiment: The FOMC removed a recession from their forecast at the latest meeting. They confirm that financial conditions have tightened significantly but the Fed is not considering rate cuts at the moment. The Fed is confident that it has achieved a sufficiently restrictive stance of policy and that we are likely to see slower growth and softening labour market conditions. The Fed confirmed that we are nearing the end of the current hiking cycle but that the lag effects are still unclear. Fed is not considering changing pace of balance sheet run-off.
For now, let's wait and see but I don't believe that the Fed is on track for their "soft landing." I predict a global recession will continue to unravel and coupled with the ongoing geopolitical conflicts; funds will continue to seek the safety of the dollar.
In terms of support, a break below the support range between 104.400 and 104.725.
Fundamentals for the dollar for the remainder of the 4Q2023:
There were no surprises with the Federal Reserve’s decision to leave the federal funds rate unchanged at 5.50% but the dovish tone from Fed chair Jerome Powell put wind in the sails behind risk-on investor sentiment. The risk-on sentiment was further supported by the weaker than expected US non-farm payrolls report which dropped to 150 thousand in October, down from 297 thousand in September. Any weaker than expected US economic data prints going forward will deem as evidence of the effect that the current rate hiking cycle has had on slowing down the US economy. As the evidence mounts for the results of the Fed’s current policy, the more the markets will price in the end of the interest hiking cycle and possible rate cuts over the near-term. This decision matrix will be the main driving force behind the market sentiment in the 4Q2023.
These were the key remarks from Fed chair Powell that sparked the risk-on sentiment: The FOMC removed a recession from their forecast at the latest meeting. They confirm that financial conditions have tightened significantly but the Fed is not considering rate cuts at the moment. The Fed is confident that it has achieved a sufficiently restrictive stance of policy and that we are likely to see slower growth and softening labour market conditions. The Fed confirmed that we are nearing the end of the current hiking cycle but that the lag effects are still unclear. Fed is not considering changing pace of balance sheet run-off.
For now, let's wait and see but I don't believe that the Fed is on track for their "soft landing." I predict a global recession will continue to unravel and coupled with the ongoing geopolitical conflicts; funds will continue to seek the safety of the dollar.