Dollar Holding Steady Ahead of FOMC This Week
FOMC Up Next
The US Dollar is on watch this week as traders brace for the July FOMC on Wednesday. While the Fed isn’t expected to change monetary policy, traders will be closely watching the meeting for clues as to how the Fed is likely to act in Q3. One interesting dynamic to be aware of now is the new Fed chairman’s clear dislike for forward guidance. He’s spoken much about how ineffective and pointless he feels forward guidance to be and has so far refrained from offering any. This means that we might get less in the way of clear clues or signals at this meeting and given that there will be no updated economic forecasts of dot plots, there will be a lot less to go on for traders.
Press Conference In Focus
With no updated forecasts at this meeting the main focus will be on the post-meeting press conference. In particular traders will be looking for Warsh’s assessment of the recent resurgence in oil prices and how this impacts the inflation outlook and Fed tightening chances over the year. Again, Warsh might choose to keep his cards close to his chest here. Furthermore, the news of the US and Iran pausing fighting this week has seen oil prices pulling back sharply from last week’s highs. As such, it is a tricky time to be forecasting the coming months.
Uncertainty Persists
If both sides can lock back into the peace process, oil prices could start to trend lower again, dampening the inflation outlook and Fe tightening prospects consequently. However, if talks break down and fighting restarts, oil will surge again and Fed tightening chances look stronger. This current uncertainty looks well reflected in USD price action with the Dollar in consolidation mode ahead of the meeting this week.
Technical Views
DXY
For now, DXY remains between the 100.50 July lows and the June highs just shy of the 101.91 level. While still within the bull channel, the focus is on a fresh break higher eventually with 103.20 the next bull target. Below, 100.18 remains the key support and pivot to watch with the bull channel lows just below offering further support.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.