US Dollar Index News: DXY Reacts to Powell’s Speech, Rate Hike Speculations Rise

Highlights

• The U.S. dollar retraces from a 12-week high, influenced by Jerome Powell’s remarks.
• Jackson Hole Symposium highlights: Powell discusses inflation control and U.S. economic strength.
• Market sentiment leans cautiously bullish, with pivotal economic data awaited.

Fed’s Rate Decision Dominates Dollar Dynamics

The U.S. dollar took a step back from its 12-week pinnacle, reacting to Federal Reserve Chair Jerome Powell’s hint at potential further rate adjustments. Despite the recent surge of the dollar index, hitting its highest since early June, the currency slightly retreated by 0.04% to 104.12. Powell’s speech at the Jackson Hole Economic Policy Symposium was a focal point, underscoring both the encouraging strides in tempering price surges and the unforeseen vigor of the U.S. economy.

Market’s Anticipation and Rate Hike Probability

Current market speculation pegs an 80% likelihood of the Federal Reserve maintaining its stance in the forthcoming month. However, with the U.S. displaying robust economic indicators, the possibility of a rate hike in November has risen, standing at 51%, a significant leap from 33% just a week ago. While other G10 central banks display signs of a prolonged halt, anticipation around the Fed’s potential move in November bolsters the dollar.

Economic Data and Inflation Concerns

The looming U.S. economic data, spanning payrolls to consumer spending, will be under the investors’ microscope this week. With inflation continuing to surpass the Fed’s benchmark and robust economic indicators on display, concerns mount around the Federal Reserve’s prolonged elevation of interest rates.

Euro and China’s Market Strategy

On the international front, the euro marked a modest ascent to $1.0808, reacting to China’s move to slash stamp duty on stock trading. This maneuver aims to reinvigorate the flagging market of the globe’s second-largest economy. Conversely, the European Central Bank’s recent commentary signaled a more restrictive policy stance, leading to a split market sentiment on an imminent rate hike.

Short-term Forecast

Given the interplay of economic indicators and central bank policies, the market exhibits a cautious bullish sentiment. With critical economic data on the horizon, investors remain on high alert for shifts that might sway rate expectations and, in turn, currency valuations.

Technical Analysis

The current 4-hour price of the DXY stands at 104.070, slightly below the previous 4-hour price of 104.164, indicating a minor retracement. The index is positioned above the 200-4H moving average of 102.103, suggesting an overarching bullish trend. Furthermore, it lies marginally above the 50-4H moving average of 103.595, which further strengthens the bullish bias. The 14-4H RSI reading of 56.70 suggests a slightly stronger momentum, leaning towards the bullish side, without being overbought.

With the price nestled between the main support area (103.273 to 103.013) and the main resistance area (104.299 to 104.403), DXY showcases a bullish inclination in the short-term, yet remains vulnerable to resistance challenges.

Overall, the current market sentiment for DXY on the 4-hour chart is bullish.