- The US dollar is stable after an early journey from a flood of geopolitical news that erupts on Monday.
- In Germany, the far -right AFD was outperformed by CDU.
- The US dollar index (DXY) has regained a loss of approximately 0.50 % and marginally higher trade at the time of writing this report.
The US dollar index (DXY), which tracks the performance of the US dollar (USD) for six major currencies, after completely Asian losses in the US trading session on Monday. The initial move came down in the US dollar, due to euphoria for the euro (EUR) after the first results in the German elections that showed a strong leadership of the Christian Democratic Union in Germany (CDU), which will take the initiative to form an alliance. With the stability of dust, this means that in the first place, no major changes will occur in Germany with regard to leadership and political agenda, which leads to increased gains in the euro and DXY to turn it into positive.
Meanwhile, American newspaper addresses were added, as many American departments, such as Pentagon, have requested employees not to proceed with the request of Elon Musk and Doge (the Ministry of Governmental efficiency) to reveal their duties. Meanwhile, Elon Musk issued warnings on Twitter that those who fail to comply with the office or submit reports to DOGE, will be placed on vacation.
At the continuous G7 meeting, the group cannot agree on a joint statement to celebrate the three years since the invasion of Russia, Ukraine, due to the differences between the United States and its European allies. The United States opposed the language that owes Moscow and an invitation to more energy sanctions, and threatened to withdraw support for a complete statement, although the discussions are continuing.
The US economic calendar begins slowly, with all eyes on the GDP of the United States (GDP) for the fourth quarter of 2024 on Thursday and PC (PCE) expenses for January on Friday. However, the National Activity Index for the Chicago team for January is Monday. Later in the day, the United States (United States) President Donald Trump is scheduled to deliver a speech.
Daily market engine: not a fan
- The euro (EUR) has abandoned all its gains against the US dollar (USD) because merchants do not like a possible lack of major reforms or changes in the German political scene to form the new government.
- The National Activity Index of Chicago Fed for January -0.03, a small loss compared to the previous 0.15 previous reading.
- The US Treasury will make bills for 3 months, 6 months, and a two -year auction this Monday.
- US President Donald Trump is scheduled to hold a press conference with France President Macron near 19:00 GMT.
- The stocks suffer from a sigh of relief after the results of the German elections, although the German DAX is fading during the day at the beginning of the American trading session. The broader Stoxx 50 index turns Europe until it turns into a US opening bell.
- The CME Fedwatch tool shows a 41.2 % chance that interest rates remain unchanged at current levels in June against 46.2 % to reduce the average of 25 basis points.
- The return in the United States is trading for 10 years around 4.43 %, a decrease of more than 3 % from the highest level last week by 4.574 %.
Technical analysis of the US dollar index: It must move
The US dollar index (DXY) depicts a textbook here, with the outcome of the German elections as an incentive. During the Asian session, the relief and support of the euro surpassed the green back in the idea that the crisis was avoided with the lack of sufficient right -wing seats to secure the initiative in Germany. However, now that the dust has settled, the markets begin to realize that the possibility of the current alliance is boring and that the same policy markets that have witnessed in the past few decades are due, which are not seen as insufficient to operate the large bullish trend in Euro.
On the upper side, the simple moving average for 100 days (SMA) can bound to buy bulls to buy Greenback near 106.61. From there, the next station can rise to 107.35, a central support from December 2024 and January 2025. In the event that the US President made some sudden comments on Monday, to 107.96 (55 days of SMA) it can be tested.
On the negative side, the level of 106.52 (April 16, 2024, the High) witnessed a wrong break now. However, this means that some stations have been operated on the market, as a few bulls were washed from their positions in the long US dollar. Less need for other leg may be needed to lure the dollar bulls to re -insert it at lower levels, near 105.89 or even 105.33.
US dollar index: daily chart
Fed questions and answers
The monetary policy in the United States is formed by the Federal Reserve (Fed). The Federal Reserve has two states: to achieve price stability and enhance full employment. Its primary performance to achieve these goals is to adjust interest rates. When prices rise very quickly and inflation is 2 % higher than the Federal Reserve goal, it raises interest rates, which increases borrowing costs throughout the economy. This leads to the most powerful USD (USD) because it makes the United States a more attractive place for international investors to stop their money. When inflation decreases to less than 2 % or the unemployment rate is very high, the Federal Reserve may reduce interest rates to encourage borrowing, which weighs on the green back.
The Federal Reserve (Fed) holds eight political meetings annually, as the FOOC Open Market Committee (FOMC) evaluates economic conditions and takes monetary policy decisions. FOMC attends twelve officials of the Federal Reserve-seven members of the Governor’s Council, President of the Federal Reserve in New York, and four regional regional regional presidents, who serve for one year on a roundabout.
In extreme situations, the Federal Reserve may resort to a policy called quantitative mitigation (QE). QE is the process that the Federal Reserve increases significantly from the flow of credit in a suspended financial system. It is a non -standard policy scale used during crises or when inflation is very low. The preferred Federal Reserve during the great financial crisis was in 2008. It includes the printing of the Federal Reserve more than dollars and their use to buy high -quality bonds from financial institutions. QE usually weakens the US dollar.
The quantitative tightening (QT) is the reverse process of QE, as the Federal Reserve stops buying bonds from financial institutions and the manager does not re -invest from mature bonds, to buy new bonds. It is usually positive for the value of the US dollar.