- The US dollar index is listed laterally after falling to a minimum of five days around 99.20.
- The headlines about China and the US, whose officials will meet this weekend in Switzerland, are generating a sigh of relief.
- The American dollar index remains caught in a waiting range while the Federal Reserve Rate decision is coming.
He Dollar index American (DXY), which tracks the performance of the US dollar (USD) compared to six main currencies, is generally stable on Wednesday around 99.40 after printing a new minimum of five days on Tuesday and seems to be in pause for now. Meanwhile, operators are evaluating the news about progress between China and the US regarding commercial conversations and prepare for the Federal Reserve (Fed) and its decision on interest rates later on Wednesday. Great changes of this rate decision are not expected, since markets have almost completely discounted that Fed will keep the rates stable despite the pressure of US President Donald Trump to cut them.
In the geopolitical front, tensions intensified between Pakistan and India. Pakistan claimed to have demolished five Indian planes and taken prisoners to soldiers in retaliation for Indian military attacks early on Wednesday. The perspective of a war between nuclearly armed neighbors should see some refuge flow towards American or gold bonds, for example, although any additional demand for shelter is, at this stage, being counteracted by the optimism of commercial conversations, Bloomberg reports.
What moves the market today: keep your breath until 18:00 GMT
- The US Treasury Secretary, Scott Besent, and US trade representative, Jamieson Greer, will travel to Switzerland for commercial conversations with the Chinese delegation, led by the Vice Prime Minister He Lifleng, this weekend. Both parties seek to display a tariff confrontation that has threatened to hit both economies. In this first phase, commercial conversations as such will not be held, but rather conversations to display the situation, according to Besent in Fox News.
- At 18:00 GMT, the Fed Rate Decision will be published with a joint statement. The Fed is expected to maintain its policy rate in the range of 4.25%-4.50%.
- At 18:30 GMT, the president of the Fed, Powell, will take the stage to comment on the recent decision of policy fees and answer questions from the reporters in the room.
- The actions are quite positive, although true recoveries are not materialized. The profits are minimized, with an advance of approximately 0.5% for European and American indices.
- The CME Fedwatch tool shows the possibility of an interest rate cut by the Federal Reserve at the June meeting at 28.3%. Later, the decision of July 30 is likely that rates are lower than current levels at 74.2%.
- The yields of 10 years of the US are quoted around 4.32%, stable for now after a four -day rise run.
Technical analysis of the dollar index: Where is that catalyst?
The American dollar index (DXY) is not really moving or responding to the surprising holder and communication of the administrations of China and the US about the commercial conversations that will begin on Saturday. The markets probably read the headlines quickly and behind the news that these conversations should be seen instead as two desperate parts joining to see how to relieve impacts on the economy. This also shows how US’s economic performance is probably beginning to have difficulties because it lacks China’s supplies, which could be filtered into another fall in the DXY once the US economic data Confirm it.
Upwards, the first resistance of the DXY is found in 100.22, which supported the index in September 2024, with a break above the round level of 100.00 as an upward signal. A firm recovery would be a return to 101.90, which acted as a key level throughout December 2023 and again as a basis for the formation of inverted shoulder-hombro (H&S) during the summer of 2024.
On the other hand, the support at 97.73 could be quickly tested before any substantial bearish holder. Below, a relatively thin technical support is located at 96.94 before looking at the lowest levels of this new price range. These would be 95.25 and 94.56, which would mean new minimums not seen since 2022.
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.
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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.
