- The FOMC meeting ended with a 50 basis point cut in interest rates to a range of 4.75% to 5.00%.
- The dot plot suggests a gradual easing cycle implying three rate cuts in 2024.
- At a press conference, Chairman Powell stressed that the Fed is in no rush.
The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, is trading sideways around 100.70 on Thursday as the market digests the Federal Reserve's (Fed) 50 basis points (bps) interest rate cut. The market overreacted to the news, raising expectations of further easing despite the Fed's efforts to signal a gradual easing cycle. On Thursday, the US released strong initial jobless claims numbers, halting the US Dollar's decline.
The US economy is experiencing mixed signs of slowdown and recovery. Some economic indicators suggest a slowdown, while others indicate that economic activity remains robust. The Fed has indicated that the pace of future interest rate adjustments will depend on upcoming economic data, so the DXY index will be sensitive to upcoming reports.
Daily Digest Market Trends: US Dollar Falls as Market Prices for Further Easing
- The FOMC cut rates by 50 basis points on Wednesday, but the dot plot suggests a more gradual easing cycle ahead.
- Despite the Fed's efforts to resist market expectations of easing, those expectations are growing.
- Markets initially lowered their expectations following the decision but are now pricing in an additional 75 basis points of rate cuts by the end of the year.
- Markets are expecting another rate cut of nearly 250 basis points over the next 12 months, which would take the federal funds rate well below neutral levels.
- The Fed released its latest macro forecasts, predicting that growth will remain strong in the third quarter.
- On the data front, the number of Americans filing new claims for unemployment insurance benefits in the week ending September 14th reached 219,000, below expectations and below the previous week's figure.
- The seasonally adjusted unemployment rate was 1.2%, with a four-week moving average of 227.
DXY Technical Outlook: DXY is in bearish momentum and needs to recover 101.00
The DXY index indicator is below the 20-day Simple Moving Average (SMA) and continues to show a bearish trend. The Relative Strength Index (RSI) is trending down below 50, increasing selling pressure. The Moving Average Convergence Divergence (MACD) is showing a bearish reversal with the green bars sagging lower.
Support is at 100.50, 100.30 and 100.00 while resistance levels are at 101.00, 101.30 and 101.60.
