- The US dollar index is still under pressure, as it tests the level of 107.50 after a sharp weekly decrease by more than 2 %.
- The S & P Global Composite PMI indicates a slowdown at 52.4 in January, compared to 55.4 in December.
- The markets have now turned their attention to the Federal Reserve decision next week.
The US dollar index (DXY), which measures the value of the US dollar against a basket of currencies, suffers from continuous losses as it decreased to below 107.50, its lowest level this week. The soft tone of US President Trump on the proposed customs tariffs on China has increased the currency downside. Meanwhile, economic data continued to show conflicting signals, which left traders careful.
Daily Summary of Market Motors: The US dollar fell after economic data and Trump’s statements
- The S & P Global Composite PMI index decreased significantly to 52.4 in January from 55.4 in December, indicating the slowdown in the pace of expansion.
- The Manufacturing Procurement Manager Index rose to 50.1, exceeding 49.6 expectations, reflecting a slight recovery in factories production activity.
- The purchasing manager index decreased to 52.8 from 56.8, indicating poor momentum in the growth of the services sector.
- On Thursday, initial unemployment demands in the United States rose to 223,000 for the week ending January 18, which is higher than the revised number for the previous week of 217,000.
- Continuous unemployment demands jumped 46,000 to 1.899 million, highlighting the increasing challenges in the labor market.
- Regarding the plans of the new management, President Trump has reduced his speech on Chinese tariffs in Davos, indicating some potential mitigation of commercial tensions.
Technical view of DXY: Signs on a deeper landfill momentum
The US dollar index (DXY) has decreased to the major level 108.00, showing the continued weakness of the downtown momentum. The relative power index remains less than 50, indicating a weaker relative force, while MACD’s chart tapes go deep into the negative area, indicating more landmark.
SMA operates a 20 -day moving average (SMA) near 108.00 now as a critical resistance level. Failure to restore this limit may lead to additional losses with the following support area near 107.00. On the contrary, a recovery above 108.00 may lead to the stability of dollar expectations and reduce more declines.
Federal Reserve Questions and answers
The monetary policy is formed in the United States by the Federal Reserve (Federal Reserve). The Federal Reserve is in charge of two tasks: achieving price stability and enhancing the full operation of the employment. The basic tool for achieving these goals is to adjust interest rates. When the prices rise very quickly and inflation is higher than the goal of the Federal Reserve of 2 %, it raises interest rates, which increases borrowing costs throughout the economy. This leads to the power of the US dollar (USD) because it makes the United States a more attractive place for international investors to save their money. When inflation decreases to less than 2% or when the unemployment rate is very high, the Federal Reserve may reduce interest rates to encourage borrowing, affecting the dollar.
The Federal Reserve (Fed) holds eight policy meetings annually, as the Federal Open Market Committee (FOC) assesses economic conditions and take monetary policy decisions. The Federal Open Market Committee meeting will be attended by twelve officials from the Federal Reserve – the seven members of the Council of Governor, the President of the Federal Reserve in New York, and four of the remaining eleven -year -old regional reserve heads, who serve for one year on the basis of rotation. .
In extreme cases, the federal reserve may resort to a policy called quantitative facilitation (QE). The quantitative facilitation is the process through which the Federal Reserve increases the flow of credit significantly in a suspended financial system. It is a non -standard political action used during crises or when inflation is very low. The Federal Reserve’s favorite weapon was during the major financial crisis in 2008. It includes the Federal Reserve prints more dollars and used them to buy high -quality bonds from financial institutions. The quantitative facilitation usually weakens the US dollar.
The quantitative tightening (QT) is the reverse process of quantitative facilitation, as the Federal Reserve stops buying bonds from financial institutions and does not re -invest capital from the bonds that are preserved, to buy new bonds. This is usually positive for the value of the US dollar.