The US Dollar (USD) began the week trading significantly weaker ahead of Monday’s US market opening, as traders increasingly anticipate a large interest-rate cut by the Federal Reserve (Fed) on Wednesday. This heightened expectation places even more focus on the upcoming Fed meeting, where Fed Chair Jerome Powell and his team will decide how to initiate policy easing—whether through a small or substantial rate cut.
Upcoming Economic Calendar of US by investing.com
In terms of economic data, the week began quietly leading up to Wednesday’s Fed decision. Tuesday’s US Retail Sales data is expected to be a key market driver, while Monday’s only significant report is the NY Empire State Manufacturing Index for September.
DXY DAILY CHART : PUBLISHED ON TRADINGVIEW
Technically, while last week saw the US Dollar Index (DXY) testing the upper band near 101.90, this Monday’s outlook suggests a possible break below the lower band at 100.62. Recent commentary, including remarks by former NY Fed member William Dudley, has added downward pressure, prompting markets to consider the possibility of a 50 basis point (bps) rate cut not just for September, but also for November. Market momentum is expected to remain within this range until Wednesday’s Fed meeting.
The upper boundary for the DXY this week stands at 101.90, with a potential 1.2% rise pushing it to 103.18. Further resistance levels include the 55-day Simple Moving Average (SMA) at 103.40 and the 200-day SMA at 103.89, just before the significant psychological mark of 104.00.
On the downside, the 100.62 level (last seen on December 28) has acted as strong support, causing rebounds in recent weeks. If it breaks, the next level to watch is the July 14 low at 99.58, and beyond that, early 2023 lows near 97.73 may come into play.