The US Dollar is in a holding pattern as it awaits the last Federal Reserve interest-rate decision of 2024. Traders are eager to see if the Fed will shift its stance due to a possible Trump-effect in 2025. The US Dollar Index (DXY) is hovering around 107.00 and has become more settled prior to Fed Chairman Powell’s remarks. It’s currently in the middle of this week’s trading range.
Market Expectations
Markets widely anticipate a 25 basis points rate cut. The focus will be on Jerome Powell’s comments and the release of the dot plot. The dot plot shows each FOMC member’s projection of future interest rates in the medium and long term.
Recent US Economic Data
The US economic calendar leading up to the Fed meeting didn’t show much activity. November’s Building Permits and Housing Starts data had mixed results. Building Permits rose to 1.505 million, exceeding the expected 1.43 million and differing from October’s 1.419 million. However, Housing Starts dropped to 1.289 million units, falling short of the estimated 1.34 million units and below October’s 1.311 million units.
Key Events Timeline
At 19:00 GMT, the Federal Reserve rate decision will be announced. Alongside, the Fed’s dot plot will be made public. Then, around 19:30 GMT, Fed Chairman Jerome Powell will take the stage. He’ll provide comments and engage in a Q&A about the recent rate decision.
Market Reactions
Equities in Europe and futures in the US are showing positive trends, supported by the rate cut expectation. The CME FedWatch Tool indicates a 95.4% probability of a 25 basis points rate cut by the Fed at Wednesday’s meeting. The US 10-year benchmark rate is trading at 4.40%, within this week’s range.
US Dollar Index Technical Analysis
Upside Potential
For the US Dollar Index, 107.00 is a crucial level. To consider a move towards 108.00, it needs to close firmly above 107.00 on a daily basis. If that occurs, the next level to watch is the recent two-year high of 108.07 from November 22.
Downside Support
In case of profit-taking, 106.52 is the first support level. The next important level is 105.53 (the April 11 high). If the DXY continues to decline towards 104.00, the 200-day Simple Moving Average at 104.19 should provide some support.
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