Greenback Heavily Sold
The US Dollar is back in the red today following some buying earlier in the session which eventually stalled and reversed. The DXY is down around 3% from the January highs with price now testing a key support level ahead of the FOMC midweek. A dovish shift in market pricing over the last fortnight has weighed on USD and traders will be keenly watching the Fed this week with a view to gauging how likely a cut is in March/May. The bank is widely expected to keep rates on hold when it meets this week, putting all the focus on its outlook and rates guidance.
Trump & Tariffs
Alongside the shifting view on the Fed, the other key driver behind the Dollar decline is the US tariff backdrop. Trump’s failure to deliver on the tariff action threatened ahead of his inauguration has fuelled a sharp unwinding of USD longs. Indeed, even successful tariff action against Columbia this week, and upcoming tariffs to be applied against Mexico and Canada this weekend have failed to revive USD buying. Perhaps there is a sense that tariffs might be delayed again or even watered down.
Near-Term Drivers
As such, USD is unlikely to see any material lift unless we get a hawkish message from the Fed this week, diluting rate cut expectations, or until tariffs are applied this weekend along with the threat of further action to come. For USD bulls, China is the key focus and a softer tone from Trump recently has been met with disappointment, if Trump starts to become more aggressive again this could help driver USD buying near-term.
Technical Views
DXY
The failed breakout above 109.35 has seen the market reversing sharply. Price has broken down below the bull channel lows and is now testing support at the 107.24 level. With momentum studies turned bearish focus is on a test of deeper support at 107.24 next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.