Last year, despite the volatility in the markets (fight against inflation, SVB collapse, conflict in Gaza....) the DXY traded in a slightly consolidative range, between the 100 and 107 price levels (compared to 2022, where the DXY rose from 95 up to almost 115).
The theme of the first quarter of 2024 is likely to be about if/when the Federal Reserve would begin to cut rates, from the current level of 5.25% down to 5%.
Based on the CME FedWatch Tool, the Feds are likely to keep rates on hold in January, but there is a 72.4% chance of a rate cut at the March 2024 meeting.
The DXY is currently at the 101.50 price level, finding support at the 100-round number area and the longer-term 61.8% Fibonacci retracement level at the 99.25 price level.
A retrace to the upside can be anticipated early in the quarter. However, the upper bound of the bearish channel and the resistance level at the 104 price level could limit further moves to the upside.
Look out for inflation and employment data to continue to support the Fed's view for rate cuts in March. This could lead the DXY to continue trading within the bearish channel.
If the price breaks below the support level of 99.25, the DXY could trade down to the major support level of 95, and the lower bound of the bearish channel.
Major Events to Watch
The theme of the first quarter of 2024 is likely to be about if/when the Federal Reserve would begin to cut rates, from the current level of 5.25% down to 5%.
Based on the CME FedWatch Tool, the Feds are likely to keep rates on hold in January, but there is a 72.4% chance of a rate cut at the March 2024 meeting.
The DXY is currently at the 101.50 price level, finding support at the 100-round number area and the longer-term 61.8% Fibonacci retracement level at the 99.25 price level.
A retrace to the upside can be anticipated early in the quarter. However, the upper bound of the bearish channel and the resistance level at the 104 price level could limit further moves to the upside.
Look out for inflation and employment data to continue to support the Fed's view for rate cuts in March. This could lead the DXY to continue trading within the bearish channel.
If the price breaks below the support level of 99.25, the DXY could trade down to the major support level of 95, and the lower bound of the bearish channel.
Major Events to Watch
- 5th Jan: Non-Farm Employment Change
- 11th Jan: CPI y/y
- 26th Jan: Core PCE Price Index
- 1st Feb: Federal Funds Rate Decision and statement
- 2nd Feb: Non-Farm Employment Change
- 13th Feb: CPI y/y
- 29th Feb: Core PCE Price Index
- 8th Mar: Non-Farm Employment Change
- 12th Mar: CPI y/y
- 21st Mar: Federal Funds Rate Decision
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Chair Powell indicated that while inflation growth is slowing down, there is a concern that it might stabilise at the current level, which is still above the target range of 2-3%.
As a result, he has pretty much ruled out the possibility of a rate cut decision at the March meeting (unless labor market weakens, which could push the timeline earlier). Markets are still pricing in a 50/50 rate cut decision in March.
However, it seems like a decision to cut in May would be the most likely scenario. For now, the DXY could continue to climb further to the upside toward the 104.30 resistance level.