Dollar Opens Bullish as Traders Wait for Fed Policy Decision
The US Dollar Was Up on Monday Open, with the U.S. Fed Decision Due Later in the Week.
Interest Rates and Asset Tapering are Key
Traders are waiting for Fed and Bank of Canada policy decision
The Fed will release its policy decision on Wednesday, with some traders speculating that is quite possible that the central bank will hike interest rates for the first time since early 2020
FOMC meeting usually changes the statement slightly at each release. Investors need to focus on these changes over time. Federal reserve latest release is the primary tool the FOMC uses to inform traders about monetary policy.
The data contains the outcome of their vote on interest rates and other policy measures, along with opinions on current economic conditions that influenced their votes. In the FOMC meeting, they also discuss the economic outlook and predict the outcome of future votes.
“We consider the higher risk is the Fed’s statement portrays an urgency to act soon, likely in March 2022, in the face of very high inflation. The urgency could culminate in a decision to abruptly stop quantitative easing (QE) by mid-February,” Commonwealth Bank of Australia analysts said in a note.
“A bullish statement and/or a faster end to the QE program could even encourage markets to price a risk of a 50bp rate hike in March,” the note added, with the analysts predicting this would lead to a knee-jerk reaction higher in the dollar.
Asia shares down as traders braced for FOMC
Asian shares tumbled on Monday as traders braced for a Federal Reserve meeting at which it is expected to confirm it will soon start draining the liquidity that has supercharged growth stocks in recent years.
Adding to the caution were concerns about a possible Russian attack on Ukraine with the U.S. State Department pulling out family members of its embassy staff in Kyiv.
The New York Times reported President Joe Biden was considering sending thousands of U.S. troops to NATO allies in Europe along with warships and aircraft.
US Index (DXY) – Technical Analysis
$DXY up to key broken support level at $95.800. At the current level, we might see DXY continue going up to $96.00 to go down again. to the lower tow support level at $94.600.
WHAT ZFX THINKS…
Fundamentally, investors need to wait for the Federal Reserve meeting’s latest release to see how the overall economics indicator plays out. It includes interest rates hike, monetary policy, and other commentaries.
On the technical side, DXY needs to go bullish above $96.400 to break the new ATH level. But, the current area is a strong resistance level for DXY.
Risk Warning: The above content is for reference only, and does not represent ZFX’s position. ZFX does not assume any form of loss caused by any trading operations carried out in accordance with this article. Please be firm in your thinking and do the corresponding risk control.
ZFX (Zeal Capital Market) is an FCA & FSA licensed online Forex & CFD broker providing more than 100 products for Forex, commodities, stock indices, and share CFDs. Open a trading account with min. USD 50 deposit and download our MT4 trading platform now!