Home Forex USD to remain on support as the Fed moves cautiously in the current economic landscape – DBS

USD to remain on support as the Fed moves cautiously in the current economic landscape – DBS

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The American dollar The index (DXY) remains supported after breaking past 103.00 last week. Economists at DBS Bank analyze the outlook for the Greenback.

US GDP and PCE deflator will support USD ahead of next week’s FOMC meeting

Critical support levels include the 103.10 mark in line with the 50-DMA and the 38.2% Fibonacci retracement level of the drop from 107.10 to 100.60 in November-December.

Despite a period of shutdown by the Federal Reserve, Fed officials clearly declined to support a market-driven rate cut in March at the FOMC meeting on 30-31. January. Important economic data this week should reinforce the Fed’s patient stance.

On Thursday, consensus forecast advanced GDP growth to decline to 2% qoq saar in Q4 2023 from 4.9% in the previous quarter, supporting a soft landing scenario. On Friday, markets will be on the lookout for PCE inflation, which will reflect CPI rising 0.2% month-on-month in December from a 0.1% decline a month earlier. Any unexpected results on these reports could prompt DXY to test resistance near 104.50, near the 100-DMA level and the 61.8% Fibo.

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