- The US dollar can be seen in front of all the main peers on Thursday.
- The operators see the Fed confirming the market projections on the cuts cycle by 2025.
- The US dollar index is still trapped between 103.00 and 104.00 for now.
The US dollar index (DXY), which tracks the performance of the US dollar (USD) compared to six main currencies, is recovered around 104.00 on Thursday after weekly data on unemployment applications. Financing costs were kept unchanged during the night by the Federal Reserve (FED), and two interest rate cuts were projected by 2025. During the FED meeting on Wednesday, President Jerome Powell said that any increase in inflation driven by tariff will be “transitory.” However, he added later that it will be very difficult to say with confidence how much of inflation comes from tariffs compared to other factors. He also mentioned that the chances of recession have increased, although they are not high, Bloomberg reports.
In the front of economic data, unemployment applications in the US and Philadelphia manufacturing data will be key. After Powell stressed that the US economy could begin to soften, operators will seek evidence of that. Any data that reaches well below the standard could trigger a certain weakness of the US dollar.
What moves the market today: not impressed
- At 12:30 GMT, the most important data for this Thursday was published:
- Initial unemployment subsidy applications in the US increased to 223,000, from 221,000. Continuous applications for unemployment subsidy in the US were 1,892 million compared to 1,859 million last week.
- The manufacturing survey of the Fed of Philadelphia for March fell to 12.5, better than expected 8.5 and from the previous 18.1.
- At 14:00 GMT, the existing housing sales data in the US will be published. Month to month for February. A 3.95 million contraction is expected compared to 4.08 million from the previous month.
- Stock markets are fighting, with European indexes facing a great benefits. The German Dax has dropped more than 1%, while future Americans begin to retreat.
- According to the CME Fedwatch tool, the probability that interest rates are maintained in the current range of 4.25%-4.50%at the May meeting is 80.5%. For June, the chances that financing costs are lower are at 71.1%.
- The 10 -year performance of the US is negotiated around 4.18%, returning to its minimum of five months of 4.10% registered on March 4.
Technical analysis of the dollar index: difficult to read
The American dollar index (DXY) is trying to get out of a technical pattern of short -term descending triangle. The inclined side of a triangle should act as strong resistance, while the flat base of the triangle in 103.18 should act as a strong support. Normally, the textbook logic is that sellers will accumulate positions next to the descending tendency line to break that flat base, which will result in more falls.
The fact that the DXY is currently trying to get out of that pattern could be a sign of a change, although a strong resistance waiting just around the corner in 104.00.
If the bulls can avoid a technical rejection in 104.00, a great impulse could occur towards the round level of 105.00, with the simple mobile average (SMA) of 200 days converging in that point and reinforcing this area as a strong resistance. Once that area is broken, a series of key levels, such as 105.53 and 105.89, could limit the bullish impulse.
In the lower part, the round level of 103.00 could be considered an bearish objective in case the US yet yields due to deteriorated data from the US, with even 101.90 on the table if the markets capitulate even more in their long -term US dollar holdings.
US dollar index: daily graphics
US interest rates
Financial institutions charge interest rates on loans to borrowers and pay them as interest to savers and depositors. They influence the basic types of interest, which are set by central banks based on the evolution of the economy. Normally, central banks have the mandate to guarantee the stability of prices, which in most cases means setting as an objective an underlying inflation rate around 2%.
If inflation falls below the objective, the Central Bank can cut the basic types of interest, in order to stimulate credit and boost the economy. If inflation increases substantially above 2%, the Central Bank usually rises the interest rates of basic loans to try to reduce inflation.
In general, higher interest rates contribute to reinforce the currency of a country, since they make it a more attractive place for world investors to park their money.
The highest interest rates influence the price of gold because they increase the opportunity cost of maintaining gold instead of investing in an asset that accrues interest or depositing effective in the bank.
If interest rates are high, the price of the US dollar (USD) usually rises and, as gold quotes in dollars, the price of low gold.
The federal funds rate is the type to a day that US banks lend each other. It is the official interest rate that the Federal Reserve usually sets at its FOMC meetings. It is set at a fork, for example 4.75%-5.00%, although the upper limit (in this case 5.00%) is the aforementioned figure.
Market expectations on the interest rate of the Federal Reserve funds are followed by the Fedwatch of the CME tool, which determines the behavior of many financial markets in the forecast of future monetary policy decisions of the Federal Reserve.
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.
