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The US Dollar Index can explain Tuesday’s “hanging man” candlestick pattern to record mild losses ahead of the key FOMC’s policy decision on Wednesday.
The US Dollar Index (DXY) renews its intraday low around 111.40, mildly offered while extending the previous day’s losses, as traders await the result of FOMC meeting on early Wednesday. In doing so, the dollar’s gauge versus the six major currencies also traces the recently softer US Treasury yields ahead of the Fed policy decision.
The US 10-year Treasury yields remain depressed at around 4.03%, following an upbeat start to November. The reason for the benchmark bond’s latest strength could be linked to the market’s fears of easy rate hike signals as the 75 basis points (bps) of a lift to the interest rate is already priced in. Even so, the firmer US data keeps the DXY bulls hopeful.
On Tuesday, the US JOLTS Job Openings increased to 10.717M in September versus the 10.0M forecast and upwardly revised 10.28M previous readings. US ISM Manufacturing PMI increased to 50.2 in October versus 50.0 market forecasts and 50.9 prior. On the same line, final readings of the US S&P Global Manufacturing PMI for October rose past 49.9 initial forecasts to 50.4 but stayed below 52.0 readings for the previous month.
Against this backdrop, the S&P 500 Futures remains indecisive even as Wall Street closed in the red. Looking forward, the DXY bulls find no surprise with the history of the Fed to disappoint the dollar buyers. There are hopes that the Fed policymakers will signal a slower rate increase from December. Even so, the Fed’s “dot plot” and Chairman Jerome Powell’s press conference will be crucial to watch for clear direction.
US Dollar Index buyers need to cross the previous day’s top surrounding 111.80 to overcome the bearish bias backed by the “hanging man”
