- The US dollar increased its headlines in the flatline on Monday.
- Traders are pondering the potential outcomes from Riyadh's Ukrainian talks this week.
- The US Dollar Index (DXY) is pasted in the mid-106 range and is looking for directions.
The US Dollar Index (DXY), which tracks the performance of the US dollar (USD) against six major currencies, trades around 106.80 for most of this Monday, but traders have met this week in Saudi Arabia in Ukraine. We are pondering the possible results. . The US (US) economy is no longer an outlier, with some data points and blood red January retail sales data released last week, pointing to slowing economic growth. All eyes of this week are in Riyadh, Saudi Arabia. In Saudi Arabia, US and Russian officials will be ahead of a meeting between US President Donald Trump and Russian President Vladimir Putin.
This week, the Economic Calendar is very gentle in preparing S&P Purchase Manager Index (PMI) data for Friday. The U.S. bond market is closed for bank leave on President's Day, but the Federal Reserve is lined up for three policymakers on Monday.
Daily Digest Market Mover: Headlines from US Officials
- The US bond market will close on Monday due to bank holidays on President's Day.
- Traders have come to the stage of a meeting between us and Russian officials between President Donald Trump and Russian President Vladimir Putin, and we and Russian officials will come to the Ukrainian trade. You need to be vigilant for every headline coming out of Riyadh.
- Patrick Harker, Federal Reserve Bank of Philadelphia, will give a speech on the economic outlook at the Central Bank Series Conference held at the University of the Bahamas in Nassau at 2:30pm.
- At 15:20 GMT, Fed Gov. Michelle W. Bowman will make a brief statement on the economy and banking regulations at the American Bankers Association (ABA) conference for Community Bankers in Phoenix, Arizona.
- Governor Christopher J. Waller, which closed at 11:00 PM GMT this Monday, will be speaking about his economic outlook at the UNSW Macroeconomic Workshop in Sydney, Australia.
- Stocks start this week with small, careful profits. US futures are traded and are in the green as well.
- The CME FedWatch tool shows a 46.7% chance that interest rates will not change at current levels in June.
- The US 10-year yield is trading around 4.48% and remains closed for trading this Monday
US Dollar Index Technical Analysis: Beware of “Principal”
The US Dollar Index (DXY) is not expected to go anywhere this Monday. Most US markets are closed for President's Day. The main focus is on headlines around Ukraine. The question here is what transactions will be placed on the table. So, keep an eye on reaching the false break in the peace agreement and see the aftermath brings a knee jerk response and DXY could rise from there.
The advantage is that previous support at 107.35 has now turned into solid resistance. Additionally, the 55-day SMA of 107.91 must be reclaimed before 108.00 is collected.
On the downside, look for support levels of 106.52 (High April 16, 2024), 106.40 (100-day SMA), and even 105.89 (resistance). The Relative Strength Index (RSI) momentum indicator on the daily chart shows more room for drawbacks, so a 200-day SMA of 104.93 could result.
US Dollar Index: Daily Chart
Central Bank FAQ
Central banks have an important task of ensuring that there is price stability in their countries and regions. When prices of certain goods or services fluctuate, the economy is constantly facing inflation or deflation. A certain price for the same item means inflation, while a certain price for the same item means deflation. The challenge for central banks is to align demand by tweaking policy rates. For the largest central banks, such as the US Federal Reserve (Fed), European Central Bank (ECB), or the Bank of England (BOE), the mission is to bring inflation closer to 2%.
Central banks have one important tool at their disposal to make inflation higher or lower. This is to fine-tune the benchmark policy rate, commonly known as interest rates. The moment you communicate in advance, the central bank will issue a statement at its policy rate and provide additional inference as to why it is still or is changing (cutting or hiking). Local banks adjust their savings and lending rates accordingly. This makes it difficult or easier for people to make money from savings, or companies to get loans and invest in their businesses. When a central bank hikes a big interest rate, this is called a financial tightening. If you are reducing your benchmark rate, it is called monetary easing.
Central banks are often politically independent. Members of the central bank's policy committee have passed a series of panels and hearings before being appointed to the policy committee. Each member of that committee is often given a specific conviction on how central banks should control inflation and subsequent monetary policy. Members who want very loose monetary policy with low prices and cheap lending are called “pipes” while satisfyingly boosting the economy significantly to see inflation just above 2%. Rather, members who want to see higher fees to reward their savings and always want to be lit by inflation are called “hawks” and do not take a break until inflation falls below 2%.
Usually, you need to lead each meeting and create a consensus between the Hawks or Doves, and when you have final decision power, you will have the current 50-50 tie. To avoid it, he or she has the final say. You need to adjust the policy. The chairman will give a speech that can be continued live, with current financial stance and outlook being conveyed. Central banks seek to promote monetary policy without causing violent fluctuations in interest rates, stocks or their currency. All members of the central bank will guide their stance towards the market ahead of policy meeting events. Members are prohibited from speaking publicly a few days before the policy meeting takes place until the new policy is communicated. This is called the blackout period.
