December 13, 2021 9:46:38
Three central banks, two tough decisions and a new Covid variant all add to the volatile mix this week. The gaggle of meetings, eight in the G20, are all mostly “live”, though it’s a given what the most important one will probably do. So much so, that consensus appears slightly too confident from this vantage point.
Wednesday’s FOMC meeting is set to increase the taper pace to pave the way for faster rate hikes. All the focus will be on the “dot plot” with the expectation of at least two hikes next year. The more hawkish projections at the June meeting turned the bearish dollar trend around then. Many believe this will happen again with an upside breakout as policy divergence with a more patient ECB kicks in.
In the meantime, the calendar is empty today which leaves the amateur immunologists to speculate about any Omicron headlines. Seasonal trends tend to see dollar weakness through December. The Russia/Ukraine military build-up also warrants some attention. But the week is all about the different paths the various central bankers are taking, looking through the new variant or kicking the can further down the road.
DXY consolidation looking to break
After a month or so of tracking sideways, the main dollar index is teasing us with a move higher this morning. It’s probably worth reminding ourselves that the index is roughly made up of the euro (58%), yen (14%), pound (12%), Canadian dollar (9%) and the Swedish krone and Swiss franc.
After making a cycle high at 96.93, the market pulled back as prices were overbought. Signals such as a daily RSI near 75 and the pair running along and above the upper Ketner band pointed to an imminent retracement.
The midway point of the March 2020 high to the January 2021 low is 96.10. A symmetrical triangle points to a breakout soon. With the long-term uptrend bullish, the index would ordinarily move higher in line with the dominant trend. Bulls will target the June 2020 highs around 97.80 if we get range expansion. The bottom of the triangle and recent range should offer strong support at 95.51.
Although Moneta Markets aims to ensure that the information/material is accurate, it cannot be held responsible for any omissions/miscalculations or mistakes as it does not warrant the accuracy of such material. Any material and/or content provided herein is intended for educational purposes only and does not constitute investment advice on how clients should trade as it does not take into consideration your personal objectives, financial circumstances or needs. Please seek independent advice before making any trading decisions. Reliance on such material is solely at your own risk and Moneta Markets cannot be held responsible for any losses resulting directly or indirectly from such reliance. Any reference to figures/statistics or numbers refers to the group of companies of Moneta Markets. Please refer to the legeal documents should you require more information.
