DXY: Short, short and short
This week has proved relatively quiet so far for the FX market, this, however, is likely to be the calm before the storm as the major economic events unfold across the globe later on in the week. The U.S. Dollar Index still hovers range bound at the time of writing this article, between 95.50 and 96.00. There is real potential for further downside movement for DXY with the Federal Reserve meetings on Wednesday and the US nonfarm payrolls report on Friday, both likely to be a catalyst for volatility.
The Fed is likely to reiterate that interest rates will not be going up again any time soon and it may signal that it will maintain a larger portfolio of assets it currently holds, thus putting an earlier end to its wind-down. There is also the potential for the Fed to warn that risks facing the US economy have risen, possibly due to a slowdown in growth in China and other emerging market economies, while domestically the impact of the tax-cut boom is fading.
From a technical perspective, 96.00 is our immediate key level of resistance. With the expected volatility in the second half of this week, I can see 95.50 support floor being wiped out easily with the price falling to 95.00 by Friday evening. The index is still printing lower lows and lower highs so as it stands I am Bearish on the Dollar, though this stance may only be short term.
Written by Sam Moore
Instagram - @Moore_fx