empty
19.01.2024 03:24 PM
Dollar: Short-Term and Medium-Term Outlook

This image is no longer relevant

At the end of the week, the U.S. Dollar Index (DXY) remains in a range, standing slightly above (by 16 points) the 103.00 mark as of this writing. Meanwhile, the dollar itself, while remaining stable against European currencies, is declining against major commodity currencies such as the Australian, New Zealand, and Canadian dollars.

These currencies, in turn, have resumed their growth against the backdrop of rising U.S. stock indexes, commodity prices, and the dollar's fall against the Chinese yuan.

The strengthening of commodity currencies against the U.S. dollar is also facilitated by technical factors: the pairs USD/CAD, NZD/USD, AUD/USD, as a result of sharp movements, have reached key medium-term resistance/support levels of 1.3485, 0.6105, 0.6600, respectively, which is often followed by a rebound.

This image is no longer relevant

The strong bullish impulse for the dollar that emerged at the beginning of the week due to the sharp escalation of the geopolitical situation in the Middle East and the Red Sea region seems to be gradually fading. However, a new escalation of the military conflict in Gaza or a new exchange of strikes by the U.S. and the Houthis could once again trigger a surge in interest in buying the safe-haven dollar. It is possible that Monday may open with another gap in such a case.

Today, investors will be monitoring the release (at 15:00 GMT) of the preliminary Consumer Sentiment Index from the University of Michigan. An increase in the index is expected in January, rising to 70 from 69.7 in December, which could give the dollar a short-term boost.

This image is no longer relevant

Also, note that there will be no statements from the Fed over the weekend in anticipation of the meeting on January 31–February 1 (the so-called "quiet week").

Everything that the members of the Federal Reserve's leadership wanted to say regarding the prospects of the U.S. Central Bank's monetary policy, they have already done so. Specifically, Raphael Bostic, head of the Atlanta Fed, said on Thursday that the base scenario involves a cut in rates somewhere in the third quarter, but care must be taken not to lower rates prematurely or risk reigniting the price spiral.

Other Fed leaders have previously expressed similar sentiments about the market's premature expectations of the Fed's monetary policy easing. For example, Fed official Christopher Waller stated the day before that the inflation target of 2.0% is "within reach," but it is premature to rush changes in the interest rate, as it is still unclear whether the inflation slowdown is sustainable. In his opinion, the Fed should act cautiously to avoid economic shocks.

Statements made by Fed officials the day before reduce the likelihood of the start of monetary policy easing at the March meeting. Now it stands at less than 60%, according to CME Group data, compared to a 75% probability at the beginning of the week.

In turn, the dollar received support from the weekly jobless claims data published on Thursday. For the reporting week, the number of initial claims fell from 203,000 to 187,000 (forecasted at 207,000), and the number of continuing claims (for the week of January 5) fell from 1.832 million to 1.806 million (forecasted at 1.845 million). The data suggest that the U.S. labor market retains resilience despite the high interest rates set by the Fed, which, along with the resurgence of inflation, prompts the U.S. Central Bank to postpone the start of monetary policy correction to the second half of the year.

Jurij Tolin,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

AUD/USD: Analysis and Forecast

The AUD/USD pair continues its sideways consolidation, remaining within a familiar range near the key psychological level of 0.6300. This movement is driven by several factors impacting global market sentiment

Irina Yanina 11:16 2025-03-28 UTC+2

EUR/USD. Analysis and Forecast

Today, the EUR/USD pair is consolidating near the key psychological level of 1.0800, showing no intention of retreating below 1.0780 as traders and investors await the release of the U.S

Irina Yanina 10:45 2025-03-28 UTC+2

Markets at a Crossroads Ahead of Tariff Announcement by D. Trump (Possible Decline in CFD Contracts on #SPX and #NDX Futures)

Markets are now fully convinced that the U.S. President will follow through on his plans to implement severe customs tariffs aimed at closing the domestic market and, in doing

Pati Gani 10:39 2025-03-28 UTC+2

Markets Have Found the Culprits

If you don't get it the first time, you will the second. The S&P 500 sell-off, led by U.S. and foreign automaker shares, continued a second day after the imposition

Marek Petkovich 08:19 2025-03-28 UTC+2

What to Pay Attention to on March 28? A Breakdown of Fundamental Events for Beginners

A fair number of macroeconomic events are scheduled for Friday, but we believe they will likely trigger only a localized market reaction. The UK will publish Q4 GDP data

Paolo Greco 06:26 2025-03-28 UTC+2

GBP/USD Pair Overview – March 28: The Pound Barely Fell Before Rising Again

The GBP/USD currency pair traded higher again on Thursday, even though a semblance of a downward correction had begun just a few days earlier. The market had already digested

Paolo Greco 03:00 2025-03-28 UTC+2

EUR/USD Pair Overview – March 28: Donald Trump Loves Surprises

The EUR/USD currency pair maintained its downward bias on Thursday, although it traded higher throughout the day. Volatility remained low once again, indicating weak market activity. However, traders had enough

Paolo Greco 03:00 2025-03-28 UTC+2

EUR/USD. Trump Sends the Dollar into Knockdown Again

The EUR/USD pair is experiencing a correction following Donald Trump's latest statements, as he has once again reignited the tariff war. Interestingly, the greenback initially reacted positively to the president's

Irina Manzenko 23:44 2025-03-27 UTC+2

Gold Knows the Path to Victory

Gold was not a market favorite following Donald Trump's victory in the November elections. In fact, it pulled back once the red wave became clear and the Republican's return

Marek Petkovich 10:55 2025-03-27 UTC+2

XAU/USD – Analysis and Forecast

Gold continues to hold its intraday gains, trading near the weekly high around the $3036 level. This is due to several factors, including uncertainty surrounding U.S. trade policy

Irina Yanina 10:44 2025-03-27 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.