US Dollar Finds Firmer Footing After FOMC Minutes Boost Market Mood. Where to for DXY?

US Dollar, USD, DXY, FOMC, Crude Oil – Talking Points

• The US Dollar found some support in the aftermath of the FOMC minutes
• APAC equities mostly yawned despite an upbeat lead from Wall Street
• US GDP and core PCE inflation gauges lie ahead. Will they also lift USD?

The market appears to have over extrapolated the FOMC minutes overnight to mean that pauses in the Fed rate hike cycle are happening further down the track.

The next two meeting have lifts of 50 basis-points baked in as confirmed by Fed Chair Powell last week. The minutes showed that a pause was possible later in the year due to the ‘expedited’ hikes. The benefits of front loading rate rises has been well discussed for some time now.

None the less, markets got excited and Treasury yields softened while the Dow, S&P 500 and Nasdaq gained 0.60%, 0.95% and 1.51% respectively. Futures are currently pointing to a slightly sluggish start to their day session.

APAC equities had a relatively quiet day with most indices pretty flat. The exception was China’s CSI 300 index, adding 1% despite Chinese Premier Li Keqiang saying that economic growth was faring worse than in 2020 due to Coivd-19 restrictions.

The comments seem to undermine the growth linked currencies of AUD, CAD and NZD, while the US Dollar and Euro saw small gains.

Gold is slightly softer today near US$1,846 an ounce. Crude oil is a bit higher with the WTI futures contract approaching US$ 111.00 bbl and the Brent contract around US$ 114.00 bbl.

Saudi Aramco CEO Amin Nasser said in a Bloomberg interview that the oil market is balanced but that spare capacity is less than 2%. He said OPEC+ adding 400k a month that will eventually lead to further reductions in spare capacity.

Looking ahead, the focus will be on the second reading of first quarter US GDP and the core PCE number.

The full economic calendar can be viewed here.

USD (DXY) Index Technical Analysis

The USD (DXY) index bumped against resistance at 102.35 yesterday and it may continue to offer resistance.

Further up, the 10-day simple moving average (SMA) and the recent 20-year peak of 105.00 could also offer resistance.

On the downside, the 55-day SMA and an ascending trendine may provide support ahead of the prior lows of 99.82 and 99.57.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter