Almost a month ago, the US Federal Reserve cut interest rates for the first time in 30 months, taking interest rate from 5.5% to 5%, and hopes of further rate cuts have been played up by market participants. But that has been complicated by this release of both the CPI number and the PPI numbers. Both data set has ticked higher, raising fear that inflation may be resurging. On top of that, we have damages and very extensive damage done by Hurricane Helene and Hurricane Milton over the past week. And this has been rather inflationary. But the most important catalyst could be lsraels expected retaliation against lran for its attack on October 1. Again, this is inflationary.
Now we have been seeing inflows into the us dollar, perhaps as a haven play, and for the last two weeks dollar has been rising. Will the dollar continue to rise ahead of next month's FOMC meeting which is scheduled on November 6 and 7th? Now remember, the us presidential election is scheduled on November 5, so this could be something that we want to watch.
And today I'll be using the mini dollar index traded on ICE, which is the intercontinental exchange, to explain my view. For perspective, we should occasionally zoom out of the market is to take a look at a higher timeframe in this particular chart that you are seeing right now.
This is the monthly timeframe, the dollar index futures going back all the way to 1986. You can see the high traded then was 129.05 and it actually has been declining over the years to the low in 2008 at the height of the global financial crisis in which the dollar index was quoting at 71.05. We can see that that was the absolute bottom over the last 40 years or so, and the market has been going higher, meaning to say that the dollar has actually rebounded off that low as a result of the global financial crisis. And the high traded was at 114.75. And that was the series of rate hikes that resulted in us interest rates rallying all the way to 5.5%. So the high in the dollar index was in September of 2022. That was two years ago. And since then, prices, the dollar index has been coming down, but it has been more or less been trading within a range of 99 to 107 over the last twelve months or so.
So this is where we are right now. And we can see that the rebound from the 2008 low is a result of a, what we call a technical rebound within a downtrend.
So the overall trend in the higher timeframe shows that the dollar is still in very much a downtrend with the rebound starting at 71.05 in 2008. As a technical rebound within a larger degree downtrend. So this is the higher perspective that we need to be aware of when we are looking at a lower timeframe.
This is the daily timeframe of the mini dollar index, futures traded out of ice. And we can see that this is based on the daily timeframe, like I mentioned earlier on. And the dollar has been rising for the past two weeks or so. The low traded here in 99.92 in the futures contract was actually registered on the last day of September. Since the start of October, we can see that the dollar index has practically been running higher and higher every single day. And it is no accident, because if you remember, October 1 is also the date in which lran actually launched missiles attack on lsrael. And that has caused the dollar to rally, basically reversing a trend in which we are seeing dollar that has been sold off on expectation of further rate cuts by the Federal Reserve. So this could possibly mean that there is evidence of a capital inflow into the United States. This is quite natural. Whenever there is a political unrest in a certain area, capital will flee that conflict area into traditionally the safe haven. And so far the safe haven has always been the United States and by extension the us dollar. So we can see that the dollar rise over the last two weeks or so on 0ctober 1coincide with the iranian attack on Israel. And this may cause further rise in the dollar going forward.
So i do not expect a major pullback in the dollar index. But if there is a pullback, I think somewhere in the area of 101.3, 537 to 101.72 is possibly what we can expect based on the high trader so far this morning......
立即開戶
網頁咨詢
QQ
Whatsapp
