Week Ahead: US dollar set for explosive week?
<p><strong>By <a href="http://investmacro.com/contributors/contributor-profile-forextime/">ForexTime</a> </strong></p>
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<ul>
<li>Big week ahead for USD due to CPI and Fed decision</li>
</ul>
<ul>
<li>Fed set to hold rates but economic projections in focus</li>
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<li>USDInd under pressure despite recent rebound</li>
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<li>Key levels of interest at 105.30, 104.26 & 102.45</li>
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<li>Breakout/down on the horizon?</li>
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<h3>Even as the clock ticks down to the key US jobs report this afternoon (Friday 8th December), traders are mindful of the flurry of high-risk events in the week ahead.</h3>
<blockquote><p>Some of the world’s largest central banks are set to make their <strong>final rate decisions for 2023</strong> while top-tier economic data from major economies will be in focus. Given how this will be topped off with <strong>‘Triple witching day’ for US markets</strong>, it may be wise to fasten your seatbelts for a wild ride!</p></blockquote>
<p><strong>Monday, 11th December</strong></p>
<ul>
<li>JPY: Japan M2 money stock</li>
<li>NZD: New Zealand home sales</li>
<li>GBP: CBI publishes latest economic forecast</li>
</ul>
<p><strong>Tuesday, 12th December</strong></p>
<ul>
<li>AUD: Australia consumer confidence</li>
<li>EUR: Germany ZEW survey expectations</li>
<li>JPY: Japan PPI</li>
<li>GBP: UK jobless claims, unemployment</li>
<li><strong>USD: US CPI report </strong></li>
</ul>
<p><strong>Wednesday, 13th December</strong></p>
<ul>
<li>NZD: New Zealand food prices</li>
<li>EUR: Eurozone industrial production</li>
<li>GBP: UK industrial production</li>
<li><strong>USD: Fed rate decision</strong>, US PPI</li>
</ul>
<p><strong>Thursday, 14th December</strong></p>
<ul>
<li>JPY: Japan machinery orders, industrial production</li>
<li><strong>CHF: SNB rate decision </strong></li>
<li><strong>EUR: ECB rate decision </strong></li>
<li><strong>GBP: BOE rate decision </strong></li>
<li>USD: US initial jobless claims, retail sales, business inventories</li>
</ul>
<p><strong>Friday, 15th December</strong></p>
<ul>
<li>CNH: China retail sales, industrial production, jobless rate</li>
<li>EUR: Eurozone/Germany S&P Global PMI’s</li>
<li>GBP: UK S&P Global/CIPS Manufacturing PMI</li>
<li>USD: US industrial production, Empire manufacturing</li>
<li><strong>SPX500: ‘Triple witching day’ for US markets</strong></li>
</ul>
<p>The scheduled data releases and events may present fresh opportunities across markets. <strong>However, our focus falls on the USD Index due to the US CPI report and Fed rate decision.</strong></p>
<p><img fetchpriority="high" decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user17/USDIndH4_0.png" alt="" width="1000" height="800" data-entity-type="file" data-entity-uuid="c90cd071-9bca-46b1-a31c-525e2f8fb818" data-src="/s3-static/users/user17/USDIndH4_0.png" /></p>
<p><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></p>
<p><strong>The USD Index could be gearing up for a significant move. Here are 3 reasons why:</strong></p>
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<h3><strong>US November CPI report</strong></h3>
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<p>The November US Consumer Price Index (CPI) report published on Tuesday will be the final data point before the Fed rate decision.</p>
<p><strong>Markets are forecasting: </strong></p>
<ul>
<li>CPI year-on-year (November 2023 vs. November 2022) <strong>to cool 3.1% from 3.2%</strong> in the prior month.</li>
<li>Core CPI year-on-year to remain unchanged at <strong>4.0%.</strong></li>
<li>CPI month-on-month (November 2023 vs October 2023) to remain unchanged at<strong> 0%</strong></li>
<li>Core CPI month-on-month to <strong>rise 0.3% from 0.2%</strong> in the prior month.</li>
</ul>
<p>Headline inflation is expected to have cooled further thanks to falling energy prices, while the annual core inflation unchanged at 4.0% <strong>– its lowest level in over two years</strong>. Further evidence of cooling prices may bolster speculation around the Federal Reserve cutting interest rates in 2024.</p>
<ul>
<li>A softer-than-expected US CPI report has the potential to drag the <strong>USDInd lower. </strong></li>
<li>Should the CPI report beat market forecasts, the <strong>USDInd could push </strong>higher ahead of the Fed decision.</li>
</ul>
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<h3><strong>Fed rate decision </strong></h3>
</li>
</ol>
<p>The Fed is widely expected to <strong>leave interest rates unchanged</strong> at its final policy meeting for 2023.</p>
<p>However, the main attraction will be the <strong>updated economic projections and dot plot</strong> which were last provided on September 20th. Together with Jerome Powell’s post meeting conference may help investors gauge what to expect from the Fed in 2024.</p>
<h3><strong>As of writing, traders are pricing in a 64% probability of a 25-basis point Fed cut by March 2024.</strong></h3>
<ul>
<li><strong>The USDInd could find itself under pressure</strong> if the Fed strikes a dovish and signals that rate cuts are on the cards from 2024.</li>
<li>Should the central bank push back on rate cut bets and signal that rates will remain higher for longer, <strong>this may give the USDInd a boost.</strong></li>
</ul>
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<h3><strong>Technical forces</strong></h3>
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<p>Despite pushing back above the 200-day SMA in recent days, the USDInd remains under pressure on the daily charts. Prices are respecting a bearish channel and trading below the 50 and 100-day SMA.</p>
<ul>
<li><strong>Should the USDInd slip back below the 200-day SMA,</strong> this may open the doors towards 102.45 and 101.80, respectively.</li>
<li>A solid breakout and daily close above <strong>104.26 </strong>could push prices toward the 50-day SMA at 105.30 and 106.00, respectively.</li>
</ul>
<p><img decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user17/USDIndDaily_15.png" alt="" width="1000" height="800" data-entity-type="file" data-entity-uuid="5721027d-b73f-4a1a-9d8e-c3b6c3476ff6" data-src="/s3-static/users/user17/USDIndDaily_15.png" /></p>
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<p><img 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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