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Can DXY Stabilize at 99.50-100 Area Despite FED 50bp Cut? Dollar Index – DXY has turned bearish after the corrective rally stopped at 105.70-106, an important resistance area at the end of June. Since then, the price even accelerated lower through summer so it appears that a bearish impulse is in play, but with recent touch of a new swing low, DXY is possibly in fifth wave, so be aware of some support in weeks ahead. But closer look shows that there is still some room left for 99.50-100 area, but if this will occur and structure a wedge shape, then we should be aware of reversals, and new correction. So as said, the price could still see a bit more weakness into the 5th wave to fully complete this ending diagonal, but then dollar can turn for a new correction, considering that recent dollar weakness has been mainly driven by these rate cut expectations, so now that this 50bp cut has been done, the dollar may stabilize due to a “buy the rumor, sell the news” effect. However, any rally will be temporary, as I think that dollar has room for much more weakness, bu ideally after another a-b-c recovery. 101.80 -102 is strong resistance. GH
TVC:DXY
by ew-forecast
What does a First Fed Rate cut really mean?ANALYSIS ON FED STANCE Powell has consistently indicated that interest rate decisions would hinge on economic data, a stance reaffirmed by the unchanged rates in the latest policy announcement. Despite the Fed's clarification that rate cuts are unlikely until there is more certainty that inflation is consistently heading towards the 2% target, some still question if this is truly a dovish stance. Persistent high inflation has led to adjustments in the market's expectations, now reflecting only a 45% likelihood of a single rate cut by September—down from earlier predictions of three cuts this year. I maintain that even this adjusted forecast is overly optimistic. (drawn and extrapolated on the chart above) Powell emphasized that the Fed requires more than a month or two of data to influence policy changes, pointing out that the data from the most recent quarter has been particularly concerning. This sentiment is reflected in the market's behavior, with rising yields and ongoing corrections in equities. Market volatility remains high, especially around Federal Open Market Committee (FOMC) announcements, evidenced by significant selling in both the Nasdaq ( NASDAQ:IXIC ) and NYSE on high trading volumes. In light of these conditions and Powell's recent remarks and the elevated volatility, I've chosen to scale back my market exposure back to nearly 100% cash for about 3 weeks now. WHAT DOES CUTTING RATE REALLY MEAN FOR STOCK MARKET I have calculated all the times when there has been a First Fed Rate Cut and extrapolated the 6-month % change and the 12-month % change following this First Fed Rate Cut. Assuming that this can happen in September (currently about 45% chance that rates will be cut in September based on the CME FedWatch Tool), then I have plotted the results using a black line. This is the average of the 24 times since 1921 that the Fed has made a FIRST rate cut. It is clear that the average scenario is very bullish with an average 12month change around +14-15% on the SP:SPX . However, what is more interesting is that if we look at the times where there is a rate cut without having a recession the scenario becomes very strong. The real concerns of the FED is that we might get reaccelerating in inflation. We are currently in a goldilocks situations, since even though inflation is a little high, the economy is growing and we are not overheating (much better position than EU economies, which are not growing so fast and would have to cut faster). Rates currently are about on average where they would be on a long term 5-year history. This reaccelerating fear is based on events happened before in 1970s and 1980s. You can see in the picture below and what the FED looks to avoid. If you are interested to play with the data, I have made the tool available in my script section. INDICATOR RAW DATA Feel free to use the raw data of the First Fed Rate cut for further analysis below. Source: Bloomberg Finance L.P. 05/05/1921 -12.01 9.87 05/01/1924 11.96 33.8 04/23/1926 11.29 12.82 08/05/1927 10.16 14.29 11/04/1929 13.87 -7.96 02/26/1932 -37.46 -29.83 04/07/1933 76.34 81.66 02/05/1954 16.7 39.39 11/15/1957 4.04 28.53 06/10/1960 -6.72 6.00 04/07/1967 8.65 3.64 08/30/1968 2.35 -6.84 11/13/1970 21.26 7.00 11/19/1971 18.61 24.04 12/09/1974 41.76 41.68 05/30/1980 16.75 17.29 11/02/1981 -7.43 16.02 11/21/1984 7.92 21.7 06/06/1989 10.31 17.17 07/06/1995 10.93 22.28 09/29/1998 21.11 26.4 01/03/2001 -4.26 -7.78 09/18/2007 -11.93 -22.78 07/31/2019 7.43 -2.05 Mean 9.9 14.43 Median 10.23 15.16
SP:SPXLong
by SimplerSignals
DXY Outlook (1st Qtr 2024)Last year, despite the volatility in the markets (fight against inflation, SVB collapse, conflict in Gaza....) the DXY traded in a slightly consolidative range, between the 100 and 107 price levels (compared to 2022, where the DXY rose from 95 up to almost 115). The theme of the first quarter of 2024 is likely to be about if/when the Federal Reserve would begin to cut rates, from the current level of 5.25% down to 5%. Based on the CME FedWatch Tool, the Feds are likely to keep rates on hold in January, but there is a 72.4% chance of a rate cut at the March 2024 meeting. The DXY is currently at the 101.50 price level, finding support at the 100-round number area and the longer-term 61.8% Fibonacci retracement level at the 99.25 price level. A retrace to the upside can be anticipated early in the quarter. However, the upper bound of the bearish channel and the resistance level at the 104 price level could limit further moves to the upside. Look out for inflation and employment data to continue to support the Fed's view for rate cuts in March. This could lead the DXY to continue trading within the bearish channel. If the price breaks below the support level of 99.25, the DXY could trade down to the major support level of 95, and the lower bound of the bearish channel. Major Events to Watch 5th Jan: Non-Farm Employment Change 11th Jan: CPI y/y 26th Jan: Core PCE Price Index 1st Feb: Federal Funds Rate Decision and statement 2nd Feb: Non-Farm Employment Change 13th Feb: CPI y/y 29th Feb: Core PCE Price Index 8th Mar: Non-Farm Employment Change 12th Mar: CPI y/y 21st Mar: Federal Funds Rate Decision
TVC:DXYShort
by JinDao_Tai
4
Trader's daily routinesAfter the OPEC meeting yesterday, the price of oil experienced a huge gap up. This is the result that many traders were expecting, but for those who are inexperienced or not mentally prepared, this situation can lead to panic and anxiety. As a trader, learning to control your emotions and resetting your mindset is crucial. When I saw the sudden rise in the price of oil, my first reaction was excitement. I started thinking about how to take advantage of this opportunity to earn more profits. However, I quickly realized that this emotion could affect my judgment and decision-making, so I took steps to reset my mindset. First, I stopped trading and took some time to think about the situation. I reviewed my trading plan, confirmed my risk management strategy, and made sure I was prepared to handle any possible scenario. Next, I started doing some meditation and breathing exercises to help me stay calm and focused. I told myself that this was just a market fluctuation, and I had enough skills and knowledge to handle this situation. Finally, I resumed trading, but with a more cautious and calm attitude. I kept a clear head, followed my plan and strategy, and prepared for possible risks. This experience has taught me a deeper understanding of the psychological qualities that a trader needs to possess. Traders need to learn to control their emotions to overcome market fluctuations and pressure. They need to have a clear trading plan and approach the market with a calm and cautious attitude. Only in this way can they continue to achieve success in the market.
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by Blackbox20221122
2
An important movement on Eur/UsdThe FOCM will begin Wednesday evening to make the market and investors understand the next moves for the short and medium term and the ECB will follow the next day. It is very likely that the euro will come out even more devalued at the end of these two days. As the European Central Bank will almost certainly show a weak economic and political scenario in the eurozone. Talking about new money injections and further postponements of a rate hike; while the FED should ensure another rate cut within the year, but then continue with its restrictive economic policy. Because an important movement on Eur/Usd we open another long position from here to close by Wednesday evening to then close all the bullish positions and reposition ourselves short. The target is the 1.119 resistance.
Long
by BFCMInvest
AUDUSD MACROeco + govt bonds. read to understand the chartAiming to support employment growth and to provide economic support RBA cut its cash rate by 25 bps to a low of 1% at the july meeting. The Australian economy grew below trend at 1.8% this was followed by low consumption and income growth. while increased investments in infrastructure is providing a pick up in activity in the resources sector. a pickup in growth in household disposable income is expected to remove the uncertainty involves outlook for low consumption. employment growth is continuing strong while wages growth remains low. mortgage rates are at record lows and the housing market is stabilising. big surplus in trade, while higher petro prices the last couple of month could have supported the growth rate for the H1 of the year. with stabilising housing market, and further rate cuts that will support the economic conditions " credit markets, employment, consumption and so on..", i expect upside moves for the aussie, while slower growth for the US. AU10Y yield have been moving down, which means an increase in buying of government bonds, and therefore increased demand for aussie dollars. Long at spot, for the rest of the year, and looking for hedging opportunity at 1:1
Long
by Fx-AlphaStrats
Tax-cut Euphoria Bubble causes turbulence There was a statistically significant bump-up in the stock market following Trump's presidential victory. (*) In 2017, the positive slope of support clearly increased from long-term under Obama (2009 to 2015) forming the shaded area I'm calling a 'bubble' (not to mention the parabolic slope above it). I expect this was due to anticipation that tax cuts would stimulate the economy. However, the exuberance was excessive, an overestimation, and long-term support is more realistic wrt GDP. I expect the turbulence we've seen since early 2018 reflects the tenuous value of the overestimation and the weight of the long-term trend keeps the bull tethered. The red star isn't so much a prediction as pointing to the 'attractor' that's pulling the market forward along a turbulent 'flat' trend, trying to guiding it toward on a more realistic track. Tax cuts and deregulation may produce real increased GDP growth, causing the trend will rise higher than the red star. Let's hope! And let's hope things don't fall lower than the star! (*) archive.is www.washingtonpost.com
DJ:DJILong
by iGoddard
AUDUSD: RBA BANK HIGHLIGHTS - CUT & SELL OR STAND PAT & LONG?Inline with the mixed information below, i too am undecided with what the RBA will do. There are several arguments for a cut e.g. CPI falling at an alarming rate/ strong trend; strong aussie; 1.75% high yield and likely to maintain AUD strength. But several against e.g. some of the trimmed prints show stability at 1.7%; need for more data - aussie employment report etc, given the AUD only holds data reports quarterly. That said, whilst im not certain on a RBA rate cut, i am certain on an RBNZ cut (more of a 25 or 50bps cut question), so going into RBA the lower conviction and risk trade is to play it through kiwi transmission e.g. short kiwi$ - an RBA cut will put downside pressure on kiwi$ too as it increases the chance of an RBNZ cut even more as the RBNZ will seek to drive their relative yield down and NZD currency appreciation down. The release is expected at AM5:30GMT - I expect aussiedollar will lose 100-200pips from market on a 25bps cut and if they stand unchanged i expect a topside rally into the 767 resistance graveyard but terminally, with a no rate cut i think we will likely see an end of week close at the 0.782 12m high resistance level assuming the USD employment report is average. Central bank confidence trades relatively low these days in the "disappointment era! however we have seen some strong conviction with bullish bets on RBA cut positioning so far with AUD$ down 100pips+ from yesterday - the lower we move pre-RBA the nastier a disappointment rally with be but also the short downside returns diminish - we could end up only seeing 100pip dropp if we move to 745 pre-decision. BAML ON THE RBA: - We expect the RBA to cut rates this week in response to a weak inflation pulse and spare capacity in the labour markeT. - A cut should lend support to the rates curve above 40bp. We await better levels to reset AU US spread compression trades. - The AUD is benefiting from the global search for positive yield and a rate cut is unlikely to deter this supportive inflow. RBA to hold due to spot on CPI? - TDS - Analysts at TD Securities explained that the recent AUD Q2 underlying CPI was spot-on the RBA’s expectations so they don’t think this will be a trigger for the Bank to cut. RBA to cut tomorrow - MUFG -Derek Halpenny, European Head of GMR at MUFG, suggests that the Australian dollar is one of those currencies that is currently much stronger than what is implied by the 2-year swap yield spread with the US. RBA to cut 25bps at its August meeting – RBC CM -Research Team at RBC Capital Markets, expects the RBA to cut 25bps at its August meeting. RBA: Not enough grounds to cut rates in August - Commerzbank - Antje Praefcke, analyst at Commerzbank notes that even though the market widely expects the RBA to cut the interest rate by 25 basis points from 1.75% to 1.50% next Asian session, they do not see enough grounds to lower the key interest rate in August. RBS - RBA to be on hold
by QuantumLogicTrading
3