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US Dollar Surges As ECB Keeps Mum On Interest Rates

January 25, 2024
by
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The US Dollar gains strength following the European Central Bank’s decision to keep interest rates unchanged, leaving traders puzzled amid expectations of a possible cut.

The market awaits ECB Chairman Christine Lagarde’s communication, which contradicts her earlier suggestion of a cut near summer.
Meanwhile, the US economic front showcases resilience, with a robust fourth-quarter Gross Domestic Product beating expectations.

However, not all figures contribute to the optimism, as the weekly Jobless Claims disappoint with an increase in both initial and continuing numbers.

The US Dollar Index experiences volatility but lacks a definitive breakout. The 10-year US Treasury Note sees a spike to 4.16%, marking the week’s peak.

Global markets react unevenly, with China’s equity markets soaring after a Reserve Ratio Requirements cut, while European equities and US futures remain cautious, awaiting further data points. The CME Group’s FedWatch Tool indicates a high probability (97.4%) of an unchanged rate decision on January 31, with a slim chance of a cut (2.6%).

In the technical realm, the US Dollar Index faces a complex scenario, caught between crucial Simple Moving Averages. The 55-day SMA and the 200-day SMA act as a floor and cap, respectively, with the former declining daily. Analysts suggest a potential breakout above 104.41, supported by positive data, could lead to further gains. Conversely, a breach below the 55-day SMA might trigger a decline to 102.60, testing the ascending trend line from September, and potentially down to 102.00.

As markets grapple with uncertainty, the US Dollar’s trajectory hangs in the balance, influenced by both domestic economic indicators and global monetary policies.

Emmanuel Ochayi
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Emmanuel Ochayi

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