. US Dollar Weekly Loss Forecast: Fed's Influence

US Dollar Weekly Loss Forecast: Fed’s Influence

US Dollar Weekly Loss Forecast: Fed’s Influence

07 Feb 2024

The US Dollar is on the verge of marking a weekly loss ahead of the US opening bell.

  • The US Dollar continues its decline from Monday’s peak performance.
  • Traders prepare for remarks from Federal Reserve speakers in a week with limited economic events.
  • The US Dollar Index aims to break below 104 as it seeks support.

The US Dollar (USD) remains largely unchanged for the week and is leaning towards a negative performance before the US opening bell. Factors such as the positive US Jobs Report and ongoing ceasefire talks in the Gaza region are starting to work in favor of the Greenback. Hamas has proposed a 135-day truce plan in three stages, currently under discussion by all parties.

On the economic front, traders anticipate mild data ahead, with the US Goods Trade Balance not expected to have a significant market impact. The key focus is on comments from three US Federal Reserve (Fed) members scheduled to speak later on Wednesday. The speakers include Adriana Kruger, a Board of Governors member, speaking around 16:00 GMT, Thomas Barking from the Richmond Fed at approximately 17:30, and Michelle Bowman, another Board of Governors member, set to speak near 19:00 GMT.

Equity markets continue to cling to the bullish trend, as previous losses in US equity futures have largely recovered. All three major futures are now trading positively in anticipation of the US opening bell.

US Dollar Index Technical Analysis:

The US Dollar Index (DXY) appears to be pausing its surge on Friday and Monday. While there’s a sense that the Greenback may regain its status as King Dollar, there are no explicit predictions that the DXY could reach 107. Currently, the DXY seems to be seeking equilibrium as it retraces slightly in search of support.

If the US Dollar Index resumes its upward movement, the initial focus should be on testing Monday’s peak around 104.60. Breaking this level is more crucial than surpassing the 100-day Simple Moving Average at 104.30. Once above the Monday high, the path is clear for a rise to 105, with particular attention to the key level at 105.12.

The 100-day SMA currently appears to be an untrustworthy factor in the ongoing rally. With a false break on Monday and no support from the moving average on Tuesday, there’s potential for a downward squeeze. The initial favorable support level is the 200-day SMA, situated around 103.59. If this level is breached, attention should shift to finding support from the 55-day SMA, located near 103.