🇺🇸 How to Trade the US Dollar this week (WN39) 🇺🇸
Week commencing the 26th of September
Analysis determines that the US Dollar is to be bought against weaker currencies prior to the GDP report on Thursday. If the report is above expectations then all longs should be aborted in preperation for a re-entry at a lower level.
The Federal Open Market Committee (FOMC) of the Federal Reserve (Fed) met last week on the 21st of September and a decision was made to hike the Federal Funds Rate (Interest Rate) by 75bps to 3.00-3.25 percent from 2.25-2.50 percent which was as expected. The policy outlook is hawkish as the FOMC also provided a projection of 4.6 percent for next year in 2023 which is up nearly a percent from the 3.8 which they projected in June. The next scheduled meeting for the FOMC is Wednesday the 2nd of November and the CME FedWatch tool indicates 66 percent odds of a 75bps hike (down from 74).
With regards to economic indicators, the CPI rate for the twelve months to August (final) was reported a couple of weeks ago at 9.1 percent which was as expected and mostly driven by energy which was up 38.6 percent. On Tuesday, the Durable Goods Orders report came in at a 0.2 percent contraction which shows a worsening situation but is better than the 0.5 percent expected.
The near-term attention of speculators is on the final GDP report for Q2 which releases on Thursday and is expected to confirm a 0.6 percent contraction.
The sentiment that is presently influencing the valuations on the US Dollar is the narrative regarding the economic slowdown. The aggressive interest rate hikes this year have quickly raised the cost of borrowing and along with high inflation have reduced the purchasing power of consumers who consist 68 percent of GDP. The outlook could turn more pessimistic if the second and final revision of Q2 GDP which is out this week has a lower reading than a 0.6 percent contraction.
Subscribe with a 50% discount to view 'Forex Field-Guides' which offers a more comprehensive research report packed with information that is intended to be used so you can improve your own analysis.
-END DISCLAIMER-
The content provided is intended for informational purposes only. Investments on the forex markets and trading decisions are made at your own risk.