Dollar Climbs Ahead Of FOMC Minutes

The DXY Index is advancing with strong gains, recovering above the 20-day SMA, while US JOLTs Jobs Openings and ISM’s December Manufacturing PMI exceeded expectations. Dovish bets on the Fed have eased slightly, but remain high.

The US Dollar Index has gained at 102.60, reclaiming the 20-day Simple Moving Average. This follows the release of the Institute Supply Management Manufacturing PMI and JOLTs Job Openings data. The Fed’s December meeting minutes will be released at 19:00 GMT.

The Fed’s dovish posture at its most recent 2023 meeting, which welcomed slowing inflation and discounted rate hikes in 2024, was well-received by markets that had dropped the US dollar earlier. Even then, fresh information may change investors’ forecasts, and the attention may move to December labour data, even though they remain highly optimistic about rate decreases in March and May 2023.

With a small increase from 47.1 to 47.4, the ISM’s Manufacturing PMI for December increased. Less than projected, with 8.75 million job openings published by the US Bureau of Labour Data, JOLTs. Investors are anticipating data on US Nonfarm Payrolls, Average Hourly Earnings, Unemployment Rate, and the Automatic Data Processing Inc. (ADP) Employment Change from December with great anticipation in order to make more bets.

The Federal Open Market Committee (FOMC) minutes might provide additional guidance to investors. Market speculation, as inferred from the CME FedWatch Tool, suggests that the odds of rate cuts in March and May have eased but are still high. A hold in January is priced in.

The Relative Strength Index (RSI) indicates a strengthening buying momentum in the DXY, suggesting buyers may continue pushing up the currency index price. The rising green bars of the Moving Average Convergence Divergence (MACD) suggest a shift towards bullish territory.

However, the picture isn’t entirely optimistic, as seen in the Simple Moving Averages (SMAs). The index’s position above the 20-day SMA underscores the short-term buying momentum, but its position below the 100 and 200-day SMAs serves as a reminder of the sustained selling strength that continues to prevail on broader time frames. This suggests a bearish undercurrent that may need to gain more momentum before the situation could tip in favor of sellers.

Support levels: 102.40 (20-day SMA),102.00, 101.50.
Resistance levels: 102.70, 102.90, 103.00.