🇺🇸 How to Trade the US Dollar (WN39 update) 🇺🇸
Updated on the 30th of September
Analysis determines that the US Dollar will gain against weaker currencies prior to the PCE report today (Friday). If the report is below expectations then any longs should be aborted.
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 58 percent odds of a 75bps hike (down from 66).
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 Thursday, the final gdp growth rate report for Q2 over Q1 came in at a 0.6 percent contraction as expected which confirms the technical recession.
The near-term attention of speculators is on the PCE report for August which releases today (Friday) and is expected at 0.5 percent inflation. 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 PCE report out today is higher than expected.
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The content provided is intended for informational purposes only. Investments on the forex markets and trading decisions are made at your own risk.