The US Dollar is on the back foot to start the week as the slowing in rate hikes from the Federal Reserve is becoming apparent. Thin trading conditions through the Asian session may have exaggerated the moves.
APAC markets might be in for a quiet week with many parts of the region celebrating the Lunar New Year. Mainland China will be joined by Hong Kong, Seoul and Singapore in taking a break and Australia also will take a holiday on Thursday.
Asian equity cash markets that were open were mostly in the green. Hong Kong’s Hang Seng index futures contract was also up over 1%.
This followed a positive finish to last week for Wall Street. Fed speakers Esther George, Patrick Harker and Christopher Waller pointed toward the central bank being less hawkish with future rate hikes – citing 25 basis points as the most appropriate steps going forward.
The word ‘restrictive’ also got plenty of airplay from them. The next Federal Open Market Committee (FOMC) meeting will be held Wednesday the 1st of February.
The commentary appears to have boosted risk assets such as equities and undermined the US Dollar.
The biggest gainers so far today have been the Kiwi Dollar, Euro and the Nordic bloc of DKK, NOK and SKK. ECB President Christine Lagarde is due to speak later today. The Japanese Yen is the only G-10 currency that is struggling to make headway against the ‘big dollar’.
Treasury yields have added a couple of basis points across most of the curve.
Crude oil is a touch softer and a gold smidge higher with the WTI futures contract under US$ 81.50 bbl while the Brent contract is below US$ 87.50 bbl. Spot gold is trading near US$ 1,930 at the time of going to print.
A data point of note later today will be the Conference Board US Leading Index.
DXY (USD) INDEX TECHNICAL ANALYSIS
The DXY index continues to languish near the May 2022 low of 101.30 which may provide support ahead of the April 2022 low of 99.42.
This pause in direction could suggest a reversal if it rallies back above the breakpoint of 103.42. The 21-day SMA is near that level, and it might offer resistance.
Further up, the prior peaks may offer resistance at 105.63, 105.82, 107.20 and 108.00.