The US Dollar Finds Firmer Footing After Fed Clarification. Has the DXY Index Peaked?

US Dollar, Federal Reserve, Waller, GBP, CHF, CCP, Bali G-20 – Talking Points

  • The US Dollar stabilized today after last week’s carnage
  • Fed’s Waller reminded markets to fight inflation
  • If China reopens, will that rekindle price pressures?

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The US dollar recouped some of last week’s losses to start the week after Federal Reserve Governor Chris Waller reiterated that he believed the Fed was not done with its hawkishness.

In comments on Sunday, he said: “We have a long, long way to go to bring inflation down. Rates are going to keep going up and they’re going to stay high for a while until we see that inflation getting closer to our target,”

That target being somewhere near 2% rather than the last reading of 7.7%.

He also pointed out that last Thursday’s low US CPI was just one data point. Several of his fellow board members have noted this observation previously.

The British pound and Swiss franc were the underperformers against the US dollar today, both down around 0.70% in European trade.

APAC stocks were mixed with Australian and Japanese indices down slightly, but Chinese and Hong Kong stocks made solid gains.

It came after hints of a Chinese Communist Party policy shift towards Covid-19-related restrictions and support for the struggling real estate sector there. Futures point to a soft start to Wall Street’s cash session.

Cryptocurrencies continue to come under scrutiny after some questions were raised about possible illegal FTX withdrawals prior to its demise. Bitcoin is looking at last week’s low at 14925.

Crude Oil is flat with the WTI futures contract holding above US$89 a barrel while the Brent contract is slightly higher at US$96 a barrel. Gold is a little softer, trading near US$1670 at press time.

Data is a little light for Monday’s session, with Swiss Industrial Production being the highlight.

US President Joe is expected to meet Chinese President Xi Jinping later today ahead of the G-20 which begins tomorrow. More broadly, it seems likely that the focus will be on any commentary regarding China-Russia’s relationship with the Western world.

The full economic calendar can be viewed here.

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TECHNICAL ANALYSIS OF THE DXY INDEX (USD)

The DXY index has moved below a long-term ascending trend line which could potentially indicate that the index’s bull run is over for the time being.

Support could be seen at the lows seen in June and August at 103.42, 103.67 and 104.64.

On the upside, resistance may be offered at the breakout points of 107.43 and 107.68.

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Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @DanMcCathyFX on Twitter

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