Fed/Treasury announcements may trigger USDInd breakout

<p><strong>By <a href="http://investmacro.com/contributors/contributor-profile-forextime/">ForexTime</a> </strong></p>
<ul>
<li>Fed/Treasury announcements today may spike FX volatility</li>
<li>USInd has climbed 3 months in a row</li>
<li>Bullish momentum stalling as traders await new catalyst for breakout</li>
<li>Dollar bulls will look to extend uptrend by 265 points</li>
<li>Dollar bears hoping for potential 120 point move south</li>
</ul>
<p>&nbsp;</p>
<h3>The USDInd may see a volatility-triggering event today (Wednesday, November 1st).</h3>
<p>Wild price swings for the USDInd would likely owe to two pivotal decisions out of the U.S:</p>
<ul>
<li><strong>US </strong><strong>Treasury refunding announcement </strong>at 12:30 GMT</li>
<li><strong>Fed rate decision</strong> @ 18:00 GMT</li>
</ul>
<blockquote>
<h3><em>The market’s general expectation is for a pause in US interest rate hikes, owing partially to rising bond yields which most analysts see as tantamount to a rate hike.</em></h3>
</blockquote>
<p><a href="https://www.forextime.com/market-analysis/trade-week-can-spx500m-recover-technical-correction">READ MORE: Trade of the Week – Can SPX500_m recover from technical correction?</a></p>
<p>&nbsp;</p>
<p>Yields on 10-year US Treasuries are hovering just below the psychological 5% level, though remains at their <strong>highest levels since 2007. </strong>And we know that the US dollar tends to have a <strong>positive correlation</strong> with Treasury yields (both are likelier to move in the same direction).</p>
<p>So, we look to the USDInd, which tracks how the US dollar performs against a basket of its G10 peers including EUR, GBP, JPY and others.</p>
<p>&nbsp;</p>
<h3>USDInd uptrend stalls, breakout imminent?</h3>
<p>Note that the USDInd has closed stronger/bullish for the last 3 months.</p>
<p>However, October also saw the shortest trading range (the difference between the highest price and the lowest price within that month):</p>
<ul>
<li><strong>August: 283 points</strong></li>
<li><strong>September: 333 points</strong></li>
<li><strong>October: 189 points</strong></li>
</ul>
<p>Such “thinning” monthly trading ranges suggest that the bullish momentum for USDInd is <strong>waning, though still intact.</strong></p>
<p>On the weekly and daily time frames, <strong>bullish flags</strong> are seen, lasting for <strong>5 weeks </strong>and <strong>27 days</strong> respectively.</p>
<p>Flag patterns are continuation patterns expected to break out in the direction of the trend (flagpole) preceding the range/sideways movement (flag).</p>
<blockquote>
<h3><em>Hence, the “flags” on both the weekly and daily timeframes imply that traders are waiting for a new catalyst that would determine the next big move for USDInd.</em></h3>
</blockquote>
<p><img decoding="async" fetchpriority="high" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user16/USDIndWeekly.png" alt="" width="1000" height="800" data-entity-type="file" data-entity-uuid="cfaac387-b6cc-405a-80e7-e3d39c15173e" data-src="/s3-static/users/user16/USDIndWeekly.png" /></p>
<p>&nbsp;</p>
<h3>How might USDInd react?</h3>
<p>If the announcement out of either the Treasury or the Fed today results in <strong>US yields resuming its uptrend</strong>, then <strong>US dollar bulls may go charging on.</strong></p>
<p>From a <strong>technical perspective</strong>, more gains may arrive if we see a strong breakout above the flag’s resistance around <strong>106.87, </strong>the flag’s resistance which is being tested currently).</p>
<p>A stronger bullish signal may be derived especially if USDInd posts highs above <strong>107.37,</strong> its highest price year-to-date.</p>
<p>&nbsp;</p>
<p>With the flagpole used as an estimate for a flag’s measured move objective …</p>
<blockquote>
<h3><em><strong>Dollar bulls will be looking for moves to the upside around 265  points.</strong>  </em></h3>
</blockquote>
<p>However, dollar-longs (those hoping that prices will move higher) may experience confrontation at key resistance levels ahead, notably:</p>
<ul>
<li><strong>107.89: </strong>intraday high on November 21, 2022, and a key battleground for bears and bulls in the past</li>
<li><strong> 110.21:</strong> the 261.8 Fibonacci level when drawn from September 30th’s intraday low to the  October 3rd intraday high.</li>
</ul>
<p><img decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user16/USDIndDaily_7.png" alt="" width="1000" height="800" data-entity-type="file" data-entity-uuid="fc9d909b-c467-4a57-871d-c665a261679b" data-src="/s3-static/users/user16/USDIndDaily_7.png" /></p>
<p>&nbsp;</p>
<p><strong>USDInd bears</strong> (those hoping prices will move lower) on the other hand will be looking for <strong>dovish comments</strong> and action from the US Federal Reserve, or a <strong>less-than-expected amount of securities to be auctioned</strong> by the Treasury (currently expected to total <strong>US $114 billion</strong>).</p>
<p>This may result in the US index ultimately declining back towards:</p>
<ul>
<li><strong>106.124:</strong> the 161.8 Fibonacci level</li>
<li><strong>105.602: </strong>the flags support zone</li>
</ul>
<p><img decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user16/USDIndDailyFib_0.png" alt="" width="1000" height="800" data-entity-type="file" data-entity-uuid="09eb71f9-80b8-4e98-9761-4be5fda9afc7" data-src="/s3-static/users/user16/USDIndDailyFib_0.png" /></p>
<p>&nbsp;</p>
<hr />
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