The US dollar movement is stable. That was happened in the Early trade this week. That currency near its highest level in two months. What is the cause?
Based on the data, it is caused by The Fed’s hawkish sentiment. Last week, they planned to boost the monetary tightening schedule. In fact, that brings a lot of effects in the market.
When this news released, the DXY index which measure the US dollar power to six other major currencies is around the level of 92.25. It is weakened by 0.07 percent daily.
At the previous session, it touched the highest level of 92.40 since the April period. Amidst the impressive USD increase in some days lately, the analysts predicted that greenback maybe flat.
The Different Monetary Policy in the Market
If the greenback is flattened, there is a possibility that they are in a consolidation position first before it continues the strengthen level to the rivals currencie. That can be happened in the market
The strong differences of the monetary policies between the Fed and the Central Bank from some developed countries may support a further dollar strengthening. Those central banks are like the SNB, ECB, and RBA.
Technically, an analyst predicted that the retracement fibonacci is in 61.8 for the dollar index. That will stay there for a while or at least several consolidations can be seen in the future.
It seems that the technical obstacle in the DXY index is so small. It means that the dollar index reposition is bullish and it is happening right now. That was stated by Chris Weston from the PepperStone Broker.
James Bullard Statement also Affects the Rising USD
It is not only about that, the USD rising which was happened in the previous session is also triggered by James Bullard. He is the president of The Fed in St. Louis. What was his statement?
He stated on Friday that the central bank's policy tightening towards monetary tightening could happen sooner. Bullard reasoned that that situation is a natural response that the Fed will take.
It is especially as a response to the surge in inflation that has occurred in recent months. The Fed's latest dot plot is a meaningful surprise. That is awaited by some market participants right now.
In the scenario that will happen in the market, we will see the potential for further weakening of the Euro currency against the US dollar. That is if the ECB maintains its current interest rate policy.
The Main Currencies Movement
The movements of major currencies such as the Euro, Sterling and a trio of commodity currencies (AUD, CAD and NZD) this morning are trying to trim losses against the US dollar experienced over the past week.
This condition is triggered by the profit taking action of investors long dollar positions, while awaiting the release of important economic data this week. It can affect the movements.
The gold (XAU/USD) extends its bounce from the lowest level in May to the level of $1.785. That increased by 0.65 percent intraday along the trading period on Friday.
By doing that, the gold sellers track a little offering of the S&P 500 futures and also the US dollar step back. It is done to overview the consolidation near its lowest multi-day position in the market.
What the Gold Commodity is Declining
The recovery movement can be closely related to the major support structure in a monthly graphic support near the $1.765 – 70. However, it must be note that the US treasury yield is declining.
The calendar is light too. That is supported by the dead news and do a research about the gold buyers. You should know that the gold declines for the last five days because of a reason.
It is actually about the concern due to the obligation purchase reduction from The Fed and the interest rate increase to get the momentum. In fact, the bad inflation expectation seems offer the middle level bounce.
