US Dollar moves sideways below 94 handle ahead of week's crucial events
- DXY struggles to find direction on Monday.
- Investors are unlikely to commit to large positions ahead of Wednesday FOMC meeting.
The US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, is fluctuating in a narrow range below the 94 mark on Monday amid a lack of fresh fundamental drivers that could impact the price action.
On Friday, the data from the United States showed that the total nonfarm payroll employment increased by 228,000 in November, beating the market expectation of 200,000. Although the DXY refreshed its multi-week high above the 94 handle with the initial reaction to the data, it failed to extend its gains and closed the week at 93.87. A softer-than-expected wage inflation data didn't allow investors to add to their bullish positions especially with the Federal Reserve's last meeting of the year looming.
On Wednesday, the Fed is widely expected to announce a 25 bps rate hike. However, markets will be paying close attention to the updated 'dot plot' that shows the rate hike projections of individual FOMC members. If Wednesday's meeting convinces markets that the Fed is looking to hike rates three more times rather than two in 2018, the DXY could gain traction and stage a bullish rally before the end of the year.
- USD: Expect the classic ‘buy the rumour, sell the fact’ FOMC rate hike moves - ING
Technical levels to consider
The index is likely to stay in its recent range on Monday and Tuesday. The initial resistance could be encountered at 94.05 (last week's high) followed by 94.55 (Nov. 11 high) and 95 (psychological level). On the flip side, supports align at 93.50 (Dec. 7 low), 93 (psychological level) and 92.40 (Nov. 27 low).