Week Ahead: USDInd braced for heavy hitters
<p><strong>By <a href="http://investmacro.com/contributors/contributor-profile-forextime/">ForexTime</a> </strong></p>
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<ul>
<li>High impact events could rock markets</li>
</ul>
<ul>
<li>Central bank decisions, earnings & data in focus</li>
</ul>
<ul>
<li>4 key factors could move USDInd</li>
</ul>
<ul>
<li>USDInd waiting for potent catalyst</li>
</ul>
<ul>
<li>Keep eye on 50, 100 and 200-day SMA</li>
</ul>
<h3><strong>A flurry of high impact events could rattle financial markets in the week ahead.</strong></h3>
<p>Rate decisions by major central banks, heavy hitting economic reports and corporate earnings from the largest companies in the world will be in focus.</p>
<p><strong>Monday, 29th January </strong></p>
<ul>
<li>NZD: New Zealand trade</li>
</ul>
<p><strong>Tuesday, 30th January </strong></p>
<ul>
<li>AUD: Australia retail sales</li>
<li>JPY: Japan unemployment</li>
<li>EUR: Eurozone/Germany GDP</li>
<li>NQ100_m: Microsoft, Alphabet earnings</li>
<li>SPX500_m: Starbucks, Pfizer earnings</li>
</ul>
<p><strong>Wednesday, 31st January </strong></p>
<ul>
<li>CNH: China non-manufacturing & manufacturing PMI’s</li>
<li>EUR: Germany CPI, unemployment</li>
<li><strong>USD: Fed rate decision,</strong> US Treasury quarterly refunding</li>
<li>WSt30_m: Boeing earnings</li>
<li>SPX500_m: Mastercard earnings</li>
</ul>
<p><strong>Thursday, 1st February </strong></p>
<ul>
<li>EUR: Eurozone S&P manufacturing PMI, CPI, unemployment</li>
<li><strong>CHF: SNB rate decision </strong></li>
<li><strong>GBP: BoE rate decision</strong></li>
<li>USD: ISM manufacturing, initial jobless claims</li>
<li>NQ100_m: Apple, Amazon, Meta earnings</li>
</ul>
<p><strong>Friday, 2nd February </strong></p>
<ul>
<li>USD: US jobs report</li>
<li>Wst30_m: Chevron earnings</li>
<li>SPX500_m: Exxon Mobil earnings</li>
</ul>
<p>Markets may experience heightened levels of volatility due to the scheduled releases and high-risk events. Our focus falls on the USDInd which seems to be waiting for a potent fundamental spark.</p>
<p><img fetchpriority="high" decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user17/USDIndWeekly_0.png" alt="" width="1000" height="800" data-entity-type="file" data-entity-uuid="9a951189-072e-481f-a22b-be97528ffd39" data-src="/s3-static/users/user17/USDIndWeekly_0.png" /></p>
<p><strong><em>The USD Index tracks how the dollar is performing against a basket of six different G10 currencies, including the Euro, British Pound, Japanese Yen, and Canadian dollar.</em></strong></p>
<p>Interestingly, the dollar has appreciated against almost all G10 currencies year-to-date.</p>
<p><img decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user17/YTD%20USD.png" alt="" width="965" height="742" data-entity-type="file" data-entity-uuid="b4c706dd-4f11-4729-8fc3-97de6a565e7d" data-src="/s3-static/users/user17/YTD%20USD.png" /></p>
<p>Dollar bulls has been supported by cooling bets around the Fed cutting rates in Q1 amid strong US economic data.</p>
<p><strong>With all the above said, the USD Index could see a significant move due to these 4 key factors:</strong></p>
<ol>
<li>
<h3>Fed Decision</h3>
</li>
</ol>
<p>According to markets, the March meeting could be a close call with traders currently pricing in <strong>a 50% probability of a US rate cut</strong> – according to Fed Fund futures.</p>
<p><em><strong>Note: The incoming PCE report this afternoon could impact these odds.</strong></em></p>
<p>Initial expectations around the Fed cutting rates earlier than expected were cooled by stronger-than-expected US economic data over the past few weeks. With this said, much attention will be directed towards Powell’s press conference for any clues on future rate moves.</p>
<blockquote><p><strong>Even if the Fed holds back on cutting rates in March, this meeting may set the stage for a cut in May.</strong></p></blockquote>
<ul>
<li><strong>The USDInd could strengthen</strong> if the Fed pushes back on rate cut bets and offers little insight on future moves.</li>
<li>Should the central bank sound strike a dovish tone, decide to cut rates or signal a rate cut in May, <strong>this may weaken the USDInd.</strong></li>
</ul>
<ol start="2">
<li>
<h3>US Treasury quarterly refunding</h3>
</li>
</ol>
<p>This is when the US government announces its plans for debt auctions for the quarter ahead.</p>
<p>It is worth noting that this event has sparked volatility in the US bond markets in the past, <strong>impacting the dollar as a result. </strong></p>
<p><em><strong>Note: Falling Bond Prices –> Rising Yields –> Appreciating Dollar (vice versa)</strong></em></p>
<p>In the last quarterly refinancing on the <strong>1st of November, </strong>the Treasury announced a lower-than-expected refunding estimate. This along with other factors sparked a selloff on the benchmark 10-year Treasury yield, <strong>dragging yields below 4% by the end of 2023 </strong>– coinciding with the selloff on the USDInd.</p>
<p><strong><em>Note: There were other forces at play weakening the dollar, primarily the Fed’s dovish pivot. </em></strong></p>
<ul>
<li>Should the announcement from the Treasury push US yields higher, <strong>this could provide the USDInd a boost.</strong></li>
<li>An announcement that results in a selloff in US yields has the potential to stimulate dollar bears, <strong>hitting the USDInd as a result. </strong></li>
</ul>
<ol start="3">
<li>
<h3>US December nonfarm payrolls (NFP)</h3>
</li>
</ol>
<p>Markets expect the US economy to have <strong>created 185,000 jobs in December</strong>, compared with the 216,000 in the previous month. The unemployment rate is forecast to remain unchanged at 3.7% while average earnings are forecast to rise 0.3% MoM compared with 0.4% in the prior month.</p>
<ul>
<li>A stronger-than-expected US jobs report could cool rate cut bets, <strong>pushing the USDInd higher as a result.</strong></li>
<li>However, evidence of a cooling US jobs market could reinforce expectations around lower US rates – <strong>pulling the USDInd lower.</strong></li>
</ul>
<ol start="4">
<li>
<h3>Technical forces</h3>
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</ol>
<p>The USDInd has been trapped within multiple ranges on the daily charts with prices entangled by <strong>the 200 and 50-day SMA</strong>. It looks like the index needs a potent fundamental or technical spark to get the engines running.</p>
<ul>
<li>A solid breakout and daily close above <strong>103.70 </strong>could trigger an incline <strong>towards the 100-day SMA at 104.40 and 105.00. </strong></li>
<li>Should prices break below the <strong>50-day SMA at 103.00,</strong> bears could be encouraged to target <strong>102.10 and 101.35. </strong></li>
</ul>
<p><img decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user17/USDIndDaily_16.png" alt="" width="1000" height="800" data-entity-type="file" data-entity-uuid="9f899dcc-25f0-43a6-9a98-69206916a372" data-src="/s3-static/users/user17/USDIndDaily_16.png" /></p>
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<p><img loading="lazy" decoding="async" class="size-full wp-image-54242 alignleft" src="https://www.investmacro.com/articles-analysis/wp-content/uploads/2014/07/Forex-Time-Logo.png" alt="Forex-Time-Logo" width="262" height="90" /><strong>Article by <span><a href="https://www.investmacro.com/contributors/contributor-profile-forextime/">ForexTime</a></span></strong></p>
<p><strong>ForexTime Ltd (FXTM)</strong> is an award winning international online forex broker regulated by CySEC 185/12 <a href="http://www.forextime.com" target="_blank" rel="noopener">www.forextime.com</a></p>
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