US DOLLAR OUTLOOK: USD PRICE ACTION STRUGGLING TO CATCH A BID AS FOMC MINUTES PROVIDE LITTLE CLARITY ON BOND BUYING PROGRAM
- US Dollar bears maintain selling pressure and steer the DXY Index to fresh month-to-date lows
- USD price action might extend lower with volatility falling and market sentiment staying upbeat
- FOMC minutes from the 11-12 November Fed meeting lacked clarity on asset purchases
The US Dollar continues to struggle as downward pressure mounts and pushes the DXY Index to a new monthly low. USD price action weakened across the board for most of Wednesday’s trading session with the US Dollar declining notably against the NZD, EUR, and GBP. The moves appear largely driven by a continuation of prevailing trends such as waning demand for safe-haven currencies like the US Dollar.
FOMC minutes from the latest Fed meeting crossed market wires, but the release sparked little movement. Federal Reserve officials discussed the details of recent asset purchases and what the path forward might look like. The FOMC minutes were fairly ambiguous on the future scale and scope of its bond buying program, however.
Recommended by Rich Dvorak
Introduction to Forex News Trading
It was noted in the Fed minutes that ‘several participants judged that the FOMC could maintain its current degree of accommodation by lengthening the maturity of purchases while reducing the pace of purchases.’ At the same time, Fed officials “generally judged that asset purchases would continue to support smooth market functioning, and many judged that asset purchases helped provide insurance against risks that might reemerge.” This could increase uncertainty about whether or not the central bank will tweak things at the December Fed meeting.
DXY – US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (28 JUL TO 25 NOV 2020)
From a technical perspective, USD selling pressure is glaring as bears push the US Dollar Index to the edge of a cliff. Downward momentum appears to have accelerated judging by the MACD indicator. Also, there could be potential for further US Dollar weakness with the relative strength index gravitating above ‘oversold’ territory. If US Dollar bulls fail to push back at this critical technical support zone around the 92.00-price level, bears might make another push toward the 31 August intraday low, which could then expose the 2017 swing low near 91.05 on the DXY Index. US Dollar bears will likely remain in control below the downward-sloping 9-day simple moving average.
USD PRICE OUTLOOK – US DOLLAR IMPLIED VOLATILITY TRADING RANGES (OVERNIGHT)
Looking ahead to Thursday’s trading session, US markets will be closed in observation of the Thanksgiving Holiday. This likely explains the muted overnight implied volatility readings for the US Dollar. That said, the prevailing bearish trend could prevail in the absence of potential catalysts for volatility. Lack of liquidity could also exacerbate market moves. Rebalancing flows might weigh on USD price action as well with month-end right around the corner.
Connect with @RichDvorakFX on Twitter for real-time market insight