Meeting Minutes May Provide Upside Momentum for the Dollar Again

Summary:

With the minutes of the Fed's November meeting to be released during the day, the market is expecting to hear any talk of a slowdown in rate hikes. However, since the November policy meeting and recent trading days, Fed officials have repeatedly suppressed market expectations, and even if they talk about slowing down interest rate hikes, the wording will probably be quite strict and will not give the market any room for speculation. In other words, the minutes of this meeting may disappoint the market, or even suppress market expectations again.

BUY USDX

Close Time

CLOSED

106.656

Entry Price

108.000

105.630

98.880 -0.070 -0.07%

102.6

Pips

Loss

105.630

Exit Price

106.656

Entry Price

108.000

Fundamentals

The dollar fell slightly by 0.58% on Tuesday, giving back most of its gains from the previous session. As many traders halted trading ahead of the Thanksgiving holiday, trading volume on the NYSE and Nasdaq stock market was only 18.9 billion shares on Monday and Tuesday, the lowest volume for any two trading days since January 3. As a result, the dollar saw a technical retracement.

Meanwhile, the US 2-year and 10-year Treasury bond yields have inverted to the greatest extent in 40 years, and the inverted curve has long been seen as a sign of an economic recession. The duration and the extent of this inversion are so profound that the market is deeply concerned. The market also bet on the Fed to cut interest rates earlier than expected. That's right, the market jumped the gun again, which also drove the dollar lower.

In addition, Cleveland Fed President Loretta Mester said that given the high level of inflation, restoring price stability is currently the Fed's primary concern. While Kansas City Federal Reserve Bank President Esther George said it may be necessary to raise interest rates to a higher level and keep them at that level for a long time to curb consumer demand and cool inflation.

Mester's attitude is very clear in previous speeches, that is, to support a slowdown in interest rate increases while continuing to keep raising rates. George stated in previous speeches that "I am more cautious than most about the pace of interest rate hikes. The Fed should be wary that rate hikes can not be too hasty". In such a context, this speech is well understood.

Overall, the two officials' speeches are basically in line with the Fed's current "broad approach", namely being "slower, higher, and longer".

Technical Analysis

In the 4H chart, the dollar falls from the highs, back again to the 107.291 - 106.034 oscillation range, temporarily supported by 106.824, which is also the neckline of the double bottom in the historical trend. The key support below is 105.465, where the 61.8% Fibonacci Retracement is located, and the price may go straight to 103.5 if it falls below this line. The resistance above is dense, containing both the top of the oscillation range, the downtrend line, and the Fibonacci Retracement. The dollar needs strong upside momentum to complete a consecutive breakout and the meeting minutes will be an opportunity to do so. As for the indicators, the DMI and Ichimoku Cloud both show that the short-term downtrend in the dollar is nearing its end and the price will start to rise after a small decline.

USDX: Meeting Minutes May Provide Upside Momentum for the Dollar Again_1

Trading Recommendations

Trading direction: Long

Entry price: 106.656

Target price: 108.00

Stop loss: 105.63

Support: 106.824/106.656/106.034/105.465

Resistance: 107.291/107.735/108.453

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