USD Weekly Forecast | technical and fundamental Analysis for DXY

18 Sep 2021

The Federal Reserve's September rate decision has been discussed extensively. The most contentious topic at the moment is whether the Fed will disclose details on reducing asset purchases. The majority of FOMC members have said they expect such action to begin later this year, as agreed upon in July. This may result in a weakening of the dollar and a resurgence of risk-on sentiment in global markets.[Abstract]

Summary Points

• DXY Weekly Forecast Technical & Fundamental AnalysisThe Federal Reserve's September rate decision, which has been discussed extensively, is rapidly approaching.
  
• The most contentious topic at the moment is whether the Fed will disclose details on reducing asset purchases, given that the majority of FOMC members have stated they expect such action to begin later this year, as agreed upon in July.
  
• Powell said in July that employment has not yet reached the threshold of "significant further improvement" that the Fed seeks before increasing rates.
  
• Following that, there was the dismal nonfarm payrolls report earlier this month, and it seems as if the Fed is unwilling to ease monetary policy at the moment.
  
• This may result in both a weakening of the dollar and a resurgence of risk-on sentiment in global markets.
  
• Analysis of DXY Longer term, the US dollar is likely to move higher, as we predicted in our Q3 forecast, and price action is on the verge of testing multiple significant chart watermarks.
  
  The first-quarter high is about 93.43, but the swing high of 93.20 is somewhat higher. The bar above that is the 2021 high, which is now trading at 93.73.

FEDERAL RESERVE ECONOMIC DATABASE MASTERLIST
_____ _____ _____ _____ _____
Summary Description of Documents Available by Year

Transcripts | Detailed record of FOMC meeting proceedings
Policy Statements | FOMC's public statements regarding its policy decisions
Summary of Economic Projections (SEP) | Compilation of FOMC participants' economic projections
Tealbooks | Economic analysis and description of policy alternatives
Memoranda of Discussion (1967-1976) | Detailed account of discussion at FOMC meetings
Record of Policy Actions & Minutes of Actions (1967-1992) | Precursor documents to the modern minutes
Greenbooks (1964-2010) | Staff analysis of the U.S. and international economy
Memos | Selected staff research and analysis provided to the FOMC
Minutes (1993-Present) | Summary of issues addressed at each FOMC meeting
Agendas | List of items to be covered at each FOMC meeting
Beige Books | Information on current economic conditions by District
Historical Minutes (1936-1967) | Records of discussions and decisions at FOMC meetings
Bluebooks (1965‐2010) | Background and context on monetary policy alternatives
Redbooks (1970-1983) | Qualitative view of economic developments by District
Statement on Longer-Run Goals and Monetary Policy Strategy | First released in January 2012, this statement articulates the framework for monetary policy and serves as the foundation for the Committee’s policy actions

19 Sep 2021

Catatan

The Federal Reserve's September rate decision has been discussed extensively. The most contentious topic at the moment is whether the Fed will disclose details on reducing asset purchases. The majority of FOMC members have said they expect such action to begin later this year, as agreed upon in July. This may result in a weakening of the dollar and a resurgence of risk-on sentiment in global markets.

The Dow Jones Industrial Average closed last week at a price lower than its 100-day moving average for the first time in 215 trading days. The consequences of this "value" index, which is a critical risk indicator for the entire financial system, are far-reaching. This maneuver sparked some activity in the following week's active trading, but it ultimately failed. As we approach the weekend, the S & P 500 is trading below its own 50-day moving average. This movement would not be a threat to the system if the Dow did not follow technical patterns, but with the expectations for the next week, it is even more concerning. The financial sector is looking forward to the FOMC statement as well as the September PMIs. We're also on the lookout for potential systemic risks like Evergrande's default risk and the "September trade" assumptions. Overconfidence can be dangerous in this situation.

19 Sep 2021

Catatan

The market will be less concerned about fundamental event risk once the timeframe and various possibilities are well established. The market will face a few end-of-life risks in the future, such as the external risk of the US debt ceiling lowering the sovereign credit rating or coronavirus epidemics halting a large economy. People believe they are as unlikely as so-called black swan candidates, as these types of people are referred to. In my opinion, Evergrande's technical default is a "grey swan," which means a high risk that is more likely to occur. The world's largest economy is well known for its willingness to act quickly to stabilize financial system risks, but in this case it has taken the opposite approach. Even if the country allows a technical default, financial contagion appears unlikely unless the government is incapable of managing the situation. To the public, a limited default may highlight the system's total power and leverage.

Seasonality in the environment should also be considered. Despite the fact that September is only three weeks old, the S & P 500 and other benchmark assets have only fallen slightly this month. For the past 40 years, this has been the only month in the calendar year with an average loss. It is also safe to predict that there will be some turbulence in the coming days, as we are dealing with a number of major events.

19 Sep 2021

Catatan

Then there are the numerous risky events planned for the coming week. Although there are entries on various days, the majority of them can be found between Wednesday and Thursday. Central bank meetings and growth-proxy PMIs comprise the event risk. The Federal Reserve is undoubtedly the most concerned of the three major institutions due to its role in monetary policy formulation.

The Bank of England has already started preparing for its own tapering, the Turkish central bank has stated that rates will be reduced if inflation forecasts worsen, and Brazilian policymakers are expected to raise rates by 100 basis points. Instead, it is critical to focus on the discussions and forecasts made by US officials. This information, on the other hand, is likely to go unnoticed until it has a market impact. Global activity in the various data runs fell in last month's report, so mood may suffer if activity falls again today and taper talk begins. Even though we believe it is critical to keep an eye on the big picture of the markets in the coming week, we don't want to get too excited. The Federal Open Market Committee's (FOMC) rate announcement on Wednesday at 6:00 PM London time is expected to be the most significant market mover. One key question is whether the Fed has expressed a desire to reduce its bond purchases. We don't think this indicates a drop in purchasing power today because markets despise shocks and dislike abrupt changes that have turned protective nets into structural supports. If they announce it, the monthly asset purchase reduction could begin as early as October or November. The issue will be discussed again on November 2nd and 3rd. The Chairman's speech is noteworthy for the panel's revised forecasts as well as commentary on market froth and the debt limit debate.

We believe a few dollar-based majors are worth keeping an eye on. Despite being the most liquid of the single currency pairs, the Euro has the greatest ability to act as a counterweight to EURUSD swings. The currency pair GBPUSD is more volatile (also referred to as the Cable). While the BOE has both hawkish and dovish options on the table, there is the possibility of discord and debate if both lean in opposing directions. While the library's finances are being reorganized, the group is working on an exciting project. Because of its high volatility, USDJPY is another pair I've added to my watch list. This dormant risk-presence taker's indicates that a total risk-move is being considered. Both the USD/BRL and the USD/TRY currency pairs, which are popular in the foreign exchange market, are approaching technical levels. Both of their central banks are capable of causing significant market movement at any time.


The 10-year Treasury yield and Fed Funds futures prices in the United States, which are more sensitive to even minor changes in monetary policy speculation, are more responsive as indicators of the expected path of rates. Even after all of that, there's still the dollar to consider. The US dollar's close last week was most likely due to a quarterly rebalancing adjustment and market participants seeking a safe haven. In contrast, the market is more likely to anticipate bullish or bearish (hawkish or dovish) outcomes.

We're keeping an eye on a variety of assets to see how the Fed's decision affects me, though most people should be able to predict what to expect based on the basic composition. The reason that the US stock market is on the verge of a crash is that "risk trends" remain constant.