FOREX Trading | Big Week For U.S. Dollar

Forex Trading David Warner

FOREX Updates, by David Warner

It’s a big week for the US Dollar……

The US Dollar finished the last week mostly flat with the Dollar Index holding around the 102 level for the 2nd consecutive week. This level is significant as it is 50% mark of the 2021-2022 move. 

We haven’t seen much from Dollar bulls and they are going to need to show up big time next week to keep hopes alive for a Dollar reversal. 

Bears have been able to wipe out 50% of 2 years’ worth of gains in just 4 short months.

FOREX Chart David Warner U.S. Dollar

This level will break one way or the other this upcoming week. Fundamentals are in the driving seat as we get big landmines from the economic calendar. 

We get policy updates from the FOMC on Weds followed by the Bank of England and the European Central Bank on Thursday. Throw in Non Farm Payroll on Friday to end the busy week with fireworks.  

The biggest event for USD is the Fed meeting. The market has priced in a 25bp hike. A 50bp hike cant be ruled out but that would be a major surprise. The market has been selling USD after 3 consecutive lower CPI prints and soft economic data. 

The market is anticipating a near term pause in the hiking cycle and will be searching for clues on that coming out of the meeting.

Given that the market is mostly short USD now and at the risk of Powell maintaining a hawkish line (we have moved a little too far too fast), one could argue that risks are skewed towards modest USD strength. 

However, the market could easily sell USD on the premise the Fed stays the course and delivers a dovish message. Preferences on the day are to hold flat into the event and look to sell rallies on the USD.

The ECB meeting could bring its own volatility. All signs point to a 50bp hike being a lock with the market already pricing another 50bp hike in March. A mild surprise here is whether they could guide towards a 25bp hike here. Weds EU CPI data could influence that call. 

The ECB has been more hawkish than other central banks with the messaging lately and should they remain steadfast in their message we could see the EUR break out of its two week range on its way to 1.10+ EUR/USD is knocking on a big weekly trend line resistance. Support is around 1.07

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