US Dollar Index News: DXY Faces Monthly Loss Amid Fed Rate-Hike Speculation

Highlights

• U.S. dollar eyes 1% monthly decline after Fed rate increase.
• Euro shows resilience with potential 1% monthly gain.
• Bank of England meeting and U.S. payrolls report to impact Fed’s September decision.

Overview

The U.S. dollar faces a monthly loss amid speculation that the Federal Reserve’s rate-hike cycle may have reached its peak after a 25-basis-point increase last week. Currently flat at 101.69 on the dollar index, it eyes a 1% monthly decline, the second consecutive loss.

EUR/USD Shows Resilience

In contrast, the euro shows resilience, with a potential monthly gain of about 1%. Eurozone inflation fell in July, but economic growth exceeded expectations in the second quarter of 2023, providing the European Central Bank room to consider a longer rate hold or another hike.

BOE Expected to Raise Benchmark Rate

The British pound remains steady with a 1.3% monthly gain ahead of the Bank of England’s policy meeting. Market expectations are balanced between a 25 and 50 basis point increase.

BOJ to Influence USD/JPY

The yen, on the other hand, softens despite its recent volatile session. The Bank of Japan’s decision to maintain ultra-low rates and loosen its bond yield curve control policy raised questions about future rate hikes.

While the dollar rose to 142.5 yen, its highest in three weeks, recent events have left traders uncertain about the yen’s outlook. The Bank of Japan’s intervention to control yields and slow the rise in its 10-year government bond yield triggered yen selling, but the lack of sustained gains suggests a cautious approach towards rate increases.

BOE Decision, US Non-Farm Payrolls to Impact DXY

As the week unfolds, markets will closely monitor these events, which will play a significant role in shaping the Federal Reserve’s monetary policy in the upcoming months. Uncertainties persist, and traders should stay vigilant in light of potential changes in the financial landscape. This week, the Bank of England’s meeting and the U.S. payrolls report are among the crucial events that will influence the Federal Reserve’s interest rate decision in September.

In conclusion, the global markets remain on edge as central banks take different approaches in responding to economic conditions. Investors will closely watch the upcoming meetings and data releases to gauge the future direction of monetary policies, which will inevitably impact currency markets worldwide.

Technical Analysis

The US Dollar Index (DXY) is exhibiting slightly bearish sentiment as it remains below the 200-4H moving average, while trading above the 50-4H moving average. The 14-4H RSI at 54.69 suggests modestly positive momentum without reaching overbought levels.

The market is currently consolidating between the main support area at 99.630-100.016 and the main resistance area at 103.280-103.424. Traders should closely watch price action around these levels to determine potential market direction.

Overall, the DXY appears to lack strong momentum and is in a consolidative phase, making it important to observe further developments for clearer trends. Nonetheless, trader reaction to the 50-4H moving average and the 200-4H moving average is likely to set the tone.