U.S. Dollar Tests New Highs As Traders Prepare For Rate Hikes
U.S. Dollar Index rallies as traders stay focused on CPI data and bet on hawkish Fed. FedWatch Tool indicates that there is a 87.1% probability that Fed will raise the federal funds rate by 25 bps at the next meeting in December. The probability of a 50 bps rate hike has increased to 12.9%. The market believes that Fed will be forced to continue the rate hike cycle to fight inflation.
U.S. Dollar Index climbed above the previous resistance at 102.35 – 102.50 and is moving towards the 103.00 level. In case U.S. Dollar Index manages to setlte above 103.00, it will get to the test of the resistance at 103.15 – 103.30.
EUR/USD Retreats As Traders Worry About Hawkish Fed
EUR/USD is losing ground as traders worry about hawkish Fed and focus on rising oil markets. Oil prices gained 2% amid no signs of additional progress in U.S. – Iran talks.
Currently, EUR/USD is trying to settle below the support level at 1.1110 – 1.1125. In case this attempt is successful, EUR/USD will move towards the next support, which is located in the 1.1015 – 1.1030 range. RSI has recently moved into oversold territory, but there is enough room to gain additional downside momentum in case the right catalysts emerge.
GBP/USD Tests Support At 1.3285 – 1.3300
GBP/USD is under pressure as traders focus on general strength of the American currency and prepare for additional rate hikes from the Fed. Rising oil prices reduced demand for risk assets, which was bearish for the British pound.
GBP/USD pulled back towards the support level at 1.3285 – 1.3300. If GBP/USD settles below the 1.3285 level, it will head towards the next support at 1.3185 – 1.3200.
EUR/USD Price Forecast
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See all EUR/USD forecastsOn the upside, GBP/USD needs to settle back above the 1.3300 level to have a chance to gain upside momentum in the near term. In this case, GBP/USD will head towards the resistance level at 1.3385 – 1.3400.
USD/CAD Stays Strong As Rally Continues
USD/CAD continues to move higher as traders bet on rate hikes from the Fed and react to rising oil prices. Other commodity-related currencies have also found themselves under pressure in today’s trading session.
The nearest resistance level for USD/CAD is located in the 1.4275 – 1.4290 range. In case USD/CAD climbs above the 1.4290 level, it will head towards the next resistance level at 1.4385 – 1.4400. I’d note that RSI has recently moved into extremely overbought territory, so the risks of a pullback are increasing.
USD/JPY Climbed Towards The 160.00 Level
USD/JPY has finally managed to settle above the previous resistance level at 158.00 – 158.50 and climbed towards the psychologically important 160.00 level.
The Japanese yen is fundamentally weak due to low interest rates in Japan. Recent changes in Fed policy outlook are bearish for the yen. Potential interventions from the Bank of Japan remain the key risk for USD/JPY bulls.
However, it remains to be seen whether BoJ is ready to provide additional support to the Japanese currency at current levels. Previous interventions yielded no results as USD/JPY is back to 160.00.
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