The US Dollar Slide Continues as Fed Hikes Appear Fully Priced. Where to for USD Index (DXY)?

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US DOLLAR, NASDAQ, APAC EQUITIES, CRUDE OIL, OPEC+, WTI - TALKING POINTS

• The US Dollar U-turn from 18-month highs has paused for now
• APAC equities returned from holidays with mixed results as oil climbs
• The Fed rocked the USD. Will BoE and ECB do the same?

The US Dollar steadied in a quiet day for currencies in Asia today. It did manage to gain a touch, while AUD, CAD, GBP and NZD all softened mildly.

According to Bloomberg surveys, the market is looking for a 25 basis point hike from the BoE to 0.50% and the ECB are expected to remain steady at -0.50%.

The Nasdaq had a positive cash session, up 0.5%. It has since moved lower in the futures market after the close, due to Meta Platforms Inc (Facebook) reporting earnings below expectations.

It is down over 2% so far in the Asian session. The Dow and S&P 500 are also headed to lower open in the North American session.

APAC equities were mixed with many markets coming back from Chinese Lunar New Year holidays. Hong Kong and South Korea saw positive catch ups, but China mainland indices were lower. Japanese and Australian bourses followed US futures down.

While stocks were sliding, Treasuries rallied as yields dipped. Australian and New Zealand 10-year yields were around 5 basis points lower

OPEC+ met yesterday and rubber-stamped an agreement to add supply at a rate of 400k barrels a day. However, it is becoming apparent from a number of sources that the cartel is unable to meet these increases.

The price certainly reflects these doubts, with the West Texas Intermediate (WTI) futures contract hitting its highest level since 2014, trading at $89.72 bbl in the North American session.

After a plethora of PMI across Europe, the Bank of England and the European Central Bank with be announcing the status of their respective monetary policies.

 

USD (DXY) INDEX TECHNICAL ANALYSIS

The DXY index has declined since forming a spinning top on Friday’s close. It then bounced off a support line at 95.83 which may continue to provide support.

Further support might be at the previous low and pivot point of 94.62 or at October low of 93.278.

On the topside, resistance could be at the pivot point of 96.938 or at the 18-month high of 97.441.

Chart created in TradingView

 

Written by Daniel McCarthy, Strategist for DailyFX.com. 3rd Feb 2022