US Dollar Index outlook: Dollar in defensive mode ahead of key central bank policy meetings
|US Dollar Index
The dollar index turned to red on Monday but remains within a narrow multi-day range, as traders stand aside, awaiting policy decisions from the US Federal Reserve, European Central Bank and the Bank of England.
The US policymakers are widely expected to further slow pace of policy tightening and hike interest rate by 25 basis points at the end of two-day policy meeting on Feb 1, while the other two central banks are likely to opt for 0.5% rate increase each, in the meetings on Thursday.
The dollar remains under strong pressure, holding in a steep fall for four straight months, deflated by dovish turn from Fed, as US inflation decreased in past few months and recent economic data showed that the US economy is performing well so far that boosted risk sentiment.
Analysts support the view of dollar’s further weakening, as the Fed is exiting its cycle of aggressive rate hikes (though the policymakers highlighted the need of further hikes and above initially estimated peak, due to expectations that inflation will remain elevated for some time), while the ECB and BOE are expected to keep hawkish stance, due to more difficult condition of their economies.
Diverging stances and converging interest rate values would add to demand for riskier assets and keep the dollar in defensive.
Technical picture remains firmly bearish on daily chart, with initial resistance provided by daily Tenkan-sen (101.94) which recently capped several attacks, followed by daily Kijun-sen (103.32), which should cap extended upticks and keep bears intact.
Res: 101.94; 102.64; 103.32; 104.05.
Sup: 100.52; 100.25; 100.00; 98.92.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.