The US Dollar Index (DXY) remains under pressure, hovering near five-month lows as expectations of Federal Reserve rate cuts in 2024 intensify. Disinflationary data and thin holiday trading contribute to the greenback’s weakness.
Markets now price in an 80% chance of easing starting March, with over 150 basis points of cuts anticipated by year-end. This dovish shift contrasts with the Fed’s hawkish stance throughout 2023, which drove DXY higher for two consecutive years.
With limited economic data releases until the new year, the Dollar’s near-term trajectory hinges on evolving rate cut expectations and holiday market dynamics.
Technical
The 4-hour chart shows that the DXY’s price action reveals a bearish tone within a falling wedge pattern. Currently, at 101.455, the index trades below the 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line), pointing to short-term bearish momentum. RSI at 48.42 indicates a neutral stance.
A breakout above the wedge could initiate a bullish move towards the 101.757 and 102.049 resistance levels. Conversely, short-term opportunities may arise towards 101.315 support if bearish momentum persists. A break below could expose 101.051.
Summary
The Dollar’s near-term direction hinges on the interplay between fading holiday flows and the Fed’s dovish tilt. A breakout above the falling wedge could ignite a bullish run towards 102.049, while a breakdown below 101.315 might open doors for further declines.
Sources: TradingView, Reuters, Dow Jones Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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