USD Under Pressure
The US Dollar has come under fresh selling pressure through early European trading on Tuesday. Dovish comments from Fed’s Waller yesterday have fuelled a reversal of the gains we saw at the start of the week. The Washington Fed governor told the audience at a central bank symposium that he was in support of a further rate cut this month.
Dovish Fed Comments
Waller explained that inflation is still forecast to return to target and a further cut at this point wouldn’t likely hinder that progress. Furthermore, Waller said that rate cuts could be slowed later on, if needed, to ensure inflation stays on track towards 2%. Waller’s comments were more definite than that of Fed’s Bostic who yesterday said that a December rate cut was not “preordained”. Fed’s Williams refrained from commenting on December specifically and in comments yesterday simply said that he expects the Fed to cut rates further ‘over time’.
US Data Due
Looking ahead, traders will be watching the JOLTS jobs number later today, ahead of the all important NFP release on Friday. A weaker figure today should help drive USD selling deeper into tomorrow where focus will turn to Fed chairman Powell who speaks just ahead of the Fed entering its pre-FOMC blackout period. As such, plenty of scope for USD volatility this week, particularly around the jobs data on Friday. Any move higher in December rate-cut pricing should see USD reversing lower through the week.
Technical Views
DXY
For now, the index remains caught between support at the 105.97 level (and the broken bear trend line just below) and the 107.25 highs. Given the rally over November, focus is on a continued push higher for now and an eventual breakout. This view only shifts on a break below the 105.97 level where focus turns to 104.05 next.
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