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USD Short-Squeeze Continues
The Dollar was seen breaking out to its highest levels in six months yesterday as debt ceiling optimism and hawkish Fed sentiment combined to drive support for the DXY. With a debt ceiling deal now looking highly likely, the expected economic boost is fuelling an uptick in hawkish Fed expectations ahead of the June meeting. Just last week, pricing for a further hike in June was sitting below the 10% level. However, developments this week have seen pricing jumping to around 40% currently.
Hawkish Fed Comments
Along with growing optimism over a potential US debt deal, several Fed members have been heard voicing more hawkish messages this week. Policymakers were heard citing their support for keeping rates higher for longer, pushing back against rate cut calls for later in the year. Indeed, some members, including Fed’s Logan who spoke yesterday, have called on the Fed to tighten further near-term in order to drive inflation down quicker. Today, focus will turn to Fed chairman Powell who is due to speak later. Any hawkish signalling from him has the potential to drive the USD rally further near-term as shorts continue to get squeezed out.
Technical Views
DXY
The rally in the Dollar Index off the 101.22 level has seen the market trading up to test the 103.48 level. With momentum studies turned bullish, the focus is on a further push higher with the bull channel top and the 104.95 level the main focus for bulls. A break of that region will open the way for a much bigger move towards 109.18.
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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.