The US Dollar advances against most major currencies
The US Dollar (USD) advances against most currencies as the Greenback saw some bids after very strong US housing data on Tuesday. Not much time though to enjoy those, as another batch of events is being unleashed today. Throughout the week, housing data is the key theme and Wednesday is no different, with the Mortgage Market Index jumping higher. Although there are only two Fed speakers today, one of them will be the most important to listen to this week. US Federal Reserve (Fed) Chairman Jerome Powell is to take the stage in the semi-annual House Financial Service Panel. Powell will try to revamp his hawkish message from last week’s Fed rate pause. The second Fed speaker today will be Federal Reserve Bank of Chicago President Austan Goolsbee, who will speak at a global food forum at 16:25 GMT.
The US Dollar is in a good mood as it is advancing higher against several major pairs this morning, with a big lead against Asian currencies and some rather smaller gains against European currencies. The US Dollar Index (DXY) advances at a steady pace, consolidating above 102.50. A break above Tuesday’s high at 102.78 would see more US Dollar strength toward the end of this week. On the upside, the 55-day Simple Moving Average (SMA) at 102.57 should be flipping back into support in case US Dollar bulls are able to trigger a daily close above. Should the DXY recover further today or this week, look for the 103.00 psychological level as the next big challenge to the upside. The 100-day SMA at 103.06 will be key to reach should the DXY want to advance further. On the downside, the psychological level near 102.00 is the only element upholding DXY. Once price action starts to reside below it, expect to see another nosedive move toward 100.82. That means a challenge for the low of this year and would imply a substantial devaluation for the Greenback to come.
Stock markets in the US are likely to turn bearish if the Federal Reserve goes into a tightening cycle to battle rising inflation. Higher interest rates will ramp up the cost of borrowing and weigh on business investment. In that scenario, investors are likely to refrain from taking on high-risk, high-return positions. As a result of risk aversion and tight monetary policy, the US Dollar Index (DXY) should rise while the broad S&P 500 Index declines, revealing an inverse correlation. During times of monetary loosening via lower interest rates and quantitative easing to ramp up economic activity, investors are likely to bet on assets that are expected to deliver higher returns, such as shares of technology companies. The Nasdaq Composite is a technology-heavy index and it is expected to outperform other major equity indexes in such a period. On the other hand, the US Dollar Index should turn bearish due to the rising money supply and the weakening safe-haven demand.
Stock markets in the US are likely to turn bearish if the Federal Reserve goes into a tightening cycle to battle rising inflation. Higher interest rates will ramp up the cost of borrowing and weigh on business investment. In that scenario, investors are likely to refrain from taking on high-risk, high-return positions. As a result of risk aversion and tight monetary policy, the US Dollar Index (DXY) should rise while the broad S&P 500 Index declines, revealing an inverse correlation. During times of monetary loosening via lower interest rates and quantitative easing to ramp up economic activity, investors are likely to bet on assets that are expected to deliver higher returns, such as shares of technology companies. The Nasdaq Composite is a technology-heavy index and it is expected to outperform other major equity indexes in such a period. On the other hand, the US Dollar Index should turn bearish due to the rising money supply and the weakening safe-haven demand.