Fed Watch
Fundamentals
The US Dollar Index has taken its share of lumps in December leading up to tomorrow?s FOMC rate decision. The prevailing market opinion suggests that the FOMC is ready to raise interest rates tomorrow. According to the Fed Funds futures, traders have priced in a 80% chance of an interest rate increase at tomorrow?s meeting. The second most important item, after the rate decision itself, will be the wording of the Committee?s statement. A statement suggesting the FOMC will raise rates now and possible pause at the next meeting could be seen as negative for the greenback. Much of the recent weakness in the US Dollar Index can be attributed to profit taking and traders lightening up positions ahead of the Fed meeting. The US Dollar Index also suffered some setbacks due to traders unwinding carry trades borrowed in Euros. Tomorrow?s FOMC meeting will likely determine the near-term direction of the market.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the cash Dollar Index trading above the 100-day moving average. The Dollar Index is hanging around some potentially vulnerable levels on the downside. In addition to the 100 day MA, which currently sits at 96.98, support near the 96.50 level is not that far off of the current market. Failure to hold one or both of these levels can lead to technical selling.
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