Key Points:
The Dollar Index (USDX) has maintained its upward trajectory, recording a recent high of 106.969, as shown in the 15-minute tick chart. The steady climb reflects a shift in market sentiment, driven by both economic expectations and political factors.
Despite the Federal Reserve’s indication of a potential December rate cut, traders are focusing on an anticipated inflationary boost from incoming President Trump’s policy platform.
This has led to reduced expectations for aggressive rate cuts, buoying the dollar against its peers.
Picture: USDX opened at 106.395, closing at 106.714, with a high of 106.831, as seen on the VT Markets app.
Traders pared back Fed cut expectations following Fed Chair Jerome Powell’s comments.
The trend data at 0.30% shows positive sentiment, as market participants re-evaluate the US economic outlook in light of Powell’s emphasis on economic resilience and sticky inflation.
The EUR/USD pair, under the weight of USD strength, has dropped to around 1.0530, reflecting the dollar’s rally. As the chart indicates, with USDX sustaining high levels, the euro struggles to find support against the greenback.
See also: EURUSD Declines Amidst USD Strength
The EUR/USD’s weakness stems from contrasting economic outlooks between the eurozone and the US, with expectations of further inflationary pressures supporting USD demand while eurozone growth remains sluggish.
Following Powell’s remarks on the strength of the US economy, traders are now projecting a softer approach to rate cuts. CME FedWatch data shows a drop in the probability of a 25 basis point cut in December, down from 82.5% to 48.3%.
The reduced likelihood of aggressive cuts supports the dollar as higher Treasury yields attract global inflows.
For traders monitoring EUR/USD, it is essential to consider both technical indicators and broader market sentiment. The USDX’s current momentum, supported by the MACD and moving averages, suggests continued pressure on the euro.
However, traders should remain cautious of potential Fed announcements or shifts in economic data that could impact dollar strength.
The USDX’s climb, combined with Powell’s cautious stance, presents a scenario where dollar bulls are likely to dominate in the short term. However, as geopolitical factors evolve and Trump’s policies come under scrutiny, further shifts in sentiment may influence the dollar’s path, impacting major pairs like EUR/USD.
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