- The US dollar sees some safe refuge tickets during the Asian session on Monday.
- The president of the USA, Trump, threatened to impose 50% tariffs on Colombia’s imports in a deportation dispute.
- The American dollar index (DXY) falls below 108.00 and reaches a key mobile average.
The US dollar index (DXY), which tracks the performance of the US dollar against six main currencies, drops slightly and quotes about 107.30 at the time of writing this Monday despite some safe refuge tickets during the Asian session. The markets were scared after the president of the United States (USA), Donald Trump, threatened to impose 50% tariffs on Colombian imports after the country refused to accept US deported immigrants The weekend. The operators now reassess their previous moderate position on tariffs, since it seems clear that they will be used more as an leverage tool.
In the front of the economic data, all eyes are put in the Federal Reserve (FED) of the US and the European Central Bank (ECB), which will announce their first monetary policy decisions this year on Wednesday and Thursday, respectively . While the ECB is ready to deliver another rate of 25 basic points (PBS), the Fed is expected to maintain the costs of unchanged loans. For this Monday, the National Activity Index of the Chicago Fed for December is the main database on which to focus.
Market promoters: all eyes on Wednesday
- At 13:30 GMT, the National Activity Index of the Chicago Fed will be published for December. The previous reading was -0.12, without forecast available.
- At 15:00 GMT, new housing sales data will be published for December, with expectations of an increase in sales to 0.67 million units from 0.664 million in November.
- The US Treasury will have a lot of work on Monday with two auction moments:
- At 16:30 GMT, short -term letters of 3 months and 6 months will be assigned.
- At 18:00 GMT, medium -term notes of 2 years and 5 years will be auctioned.
- The actions fall on Monday due to concerns about the assessments of AI and overestimated profits in the technological sector. All European and futures of US actions quote more than 1%.
- The CME Fedwatch tool projects a 43.8% probability that interest rates remain without changes in current levels at the May meeting, suggesting a rate cut that month. The Federal Reserve (Fed) is expected to remain dependent on the data with uncertainties that could influence inflation during the mandate of the US president, Donald Trump.
- The 10 -year bonus of US bonus quotes around 4,526%, further from its maximum of more than a year earlier this month in 4,807%.
Technical analysis of the US dollar index: it gets ugly
The American dollar index (DXY) is surpassed in the sure shelter offer on Monday. Instead, investors are buying more American bonds and Japanese yen (JPY). The latter is currently rising more than 1% against the US dollar, ballasting the DXY since it represents 13.6% of the weight. Wait volatile movements in the DXY for Wednesday during the announcement of the Fed decision.
There is a long way to recovery. First, the psychological level of 108.00 must be recovered. From there, 109.29 (Maximum of July 14, 2022 and a line of ascending trend) is the following to recover the losses of last week. Above, the next climbing level to be achieved before progress is still 110.79 (maximum of September 7, 2022).
Downward, the convergence of the maximum of October 3, 2023 and the simple mobile average (SMA) of 55 days around 107.56 should act as a double security feature to support the price of DXY. For now, that seems to be maintained, although the relative force index (RSI) still has some space for decline. Therefore, look for levels of 106.52 or even 105.89 as better levels for the bundles of the US dollar to get involved and trigger a reversal.
US dollar index: daily graphics
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
