US Dollar, DXY Index, USD, PCE, US Treasury Yield, ECB, G-20, USD/JPY – Talking Points
- of USD Rises again as price pressures intensify
- Fed Reminds Markets of Their Intentions, Yields Respond
- Equities and risk assets have struggled.intention USD Driven by emotions?
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The US dollar maintained the gains seen towards last week’s close after the US PCE core surged higher on Friday and Fed officials repeated their hardline stance.
In summary, the US core PCE index for the end of January on Friday was up 4.7% year-on-year, compared to expectations of 4.3% and 4.6% earlier. This is seen by the market as the Fed’s favorite inflation indicator.
Risk assets are generally under pressure to start the week as the market considers the Federal Reserve’s interest rate path. A 25 basis point rate hike is priced in at his next three meetings, and the peak of this interest rate cycle is now 5.4%, rather than the 4.9% expected last month.
Fed Governors Loretta Mester, James Bullard and Susan Collins made hawkish comments over the weekend.
Government bond yields remain higher than seen on Friday, with 2-year yields once again surging above 4.8%, threatening last November’s 15-year peak of 4.88%.
APAC stocks are mostly in the red today, reflecting Friday’s negative US equities performance. Futures mark a steady start to the subsequent Wall Street cash session.
Currency markets have had a mostly quiet day so far, with the Australian dollar and Kiwi dollar declining reflecting risk-averse sentiment.
The G-20 meeting ended without consensus on the wording of the communiqué. Russia and China objected to the terminology and language regarding the war in Ukraine.
Ignazio Visco, a member of the European Central Bank (ECB) Governing Council and governor of the Bank of Italy, said he would limit interest rates as much as necessary to deal with the inflation problem.
Friday’s strength in oil prices continues today, with the WTI futures contract above 76 barrels and the Brent contract tweaking towards 83 barrels. Gold looks vulnerable as it trades towards USD 1,800 an ounce.
The incoming Bank of Japan Governor Ueda said in the Diet today that the current monetary policy stance is appropriate for now.
You can view the full economic calendar here.
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DXY (USD) INDEX Technical Analysis
The DXY Index continues to rise after breaking out of the downtrend channel.
The 21-day y Simple Moving Average (SMA) has risen above the 55-day SMA, producing a golden cross indicating that the bullish momentum may evolve.
Resistance is likely at the previous peaks of 105.63 and 105.82. The latter also has him near the 100-day SMA and could be a resistance.
On the downside, support is likely at the breakpoint of 104.67 above previous lows of 103.76, 102.58, and 100.82.
Chart created with TradingView
— Written by DailyFX.com Strategist Daniel McCarthy
please contact daniel @DanMcCathyFX on Twitter