The US Dollar Index (USDX) has re-entered the limited range within the past two weeks, regaining its opening level from Monday. As soon as the US Defense Department promptly dispelled rumors of killing three US military personnel at a base in Jordan, safe haven inflows into the US Dollar.
A Hawkish FOMC Could Boost USDX Bulls
Moreover, the upcoming interest rate decision would be a crucial event. As of now, analysts anticipate no change in the rate but a hawkish tone with a rate cut possibility might increase the volatility in the USDX.
Long-term yields are anticipated to increase with a rise in US Treasury yields. However, disinflationary trends, the March conclusion of the Bank Term Funding Program (BTFP), and an increase in the issuance of US Treasury coupons all contribute to a favorable setting for future monetary policies that are less interventionist in nature.
Analysts expect a decrease in quantitative tightening before any interest rate cuts. Nonetheless, the March evaluation of economic projections by the Federal Reserve may trigger deliberation on both of these metrics. The first half of the year creates the conditions for a possible bond rally and the yield curve steepening. However, the real obstacle awaits in the latter part of 2024, when persistent inflation could cause the Federal Reserve to fall short of market anticipations regarding interest rate cuts.
US Employment In Focus
A significant foreshadowing of the major events slated for Wednesday and Friday was the US JOLTS Job Openings, which occurred on the economic front. In light of an upward revision of previous figures and December's figures exceeding 9 million, the unfilled job market continues to be saturated.
Although a direct correlation with the forthcoming US Employment Report may not exist, this data may heighten the anticipation surrounding its release on Friday.
US Dollar Index (USDX) Technical Analysis
The current market momentum is corrective in the daily chart of the US Dollar Index (USDX), supported by the rising 20-day Exponential Moving Average.
Following the long-term direction, the recent price trades below the 50% Fibonacci Retracement level from the 107.35 high to the 100.64 low. As the current price trades at the discounted zone, buying pressure can provide decent trading opportunities. Also, an imbalance is present above the 100-day SMA resistance, which is still unmitigated.
Based on this outlook, a bullish trend continuation is potent where a daily close above the 104.00 level could increase the price towards the 105.58 level.
On the bearish side, 102.77 would be the crucial level to look at as the upcoming volatility from the interest rate decision could initiate a bearish breakout for this instrument.
