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US Dollar dips with EU sanctions published, ahead of South Carolina Primaries


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  • The US Dollar trades in the red on Friday, and for the week.
  • Market sentiment was very positive for equities, bearish for the US Dollar this week.
  • The US Dollar Index falls below 104 again and selling pressure is visible on the charts. 

The US Dollar (USD) is closing this week’s performance at a loss. A correlation with the risk sentiment and the fact that equities had a very upbeat week makes it clear that the US Dollar does not thrive when there is a risk on tone present in markets. With all three major US equity indices firmly higher for this week, the US Dollar Index is taking a step back and is set to close out the week lower. 

On the economic data front, there is nearly nothing to report. Besides possibly a few surprise unscheduled comments from an US Federal Reserve member, it looks like markets will slowly head out into the weekend. Next week, nearly every day sees a pivotal number due to be released, with Durable Goods, US Gross Domestic Product, Personal Consumption Expenditures and Manufacturing data from the Institute of Supply Management all on the docket. 

Daily digest market movers: EU sanctions released

  • Little by little more details are coming out on the sanctions packages both EU and US will be issuing. 
  • Nikkey Haley and former US President Donald Trump are facing their next vote in the presidential race this Saturday. This time the stage is in South Carolina with primaries on the docket. 
  • ECB governor Robert Holzmann made comments on Bloomberg television, saying that the European Central Bank (ECB) will not cut this year and will only consider cutting later and bigger rather than cutting too early. 
  • The EU has released its list of sanctioned companies in Russia, China, India and several other countries that are seen by the EU as aiding Russia in its war. 
  • The US from their side are still working on another sanction package this Friday. The packages come after opposition leader Alexei Navalny died in detention a few days ago.
  • Equities are in the green, following suit with the upbeat sentiment in Asia where the Nikkei rallied again over 2%.
  • The CME Group’s FedWatch Tool is now looking at the March 20 meeting. Expectations for a pause are at 97.5%, while chances of a rate cut stand at 2.5%. 
  • The benchmark 10-year US Treasury Note trades around 4.30%, retrets off Friday’s high. 

US Dollar Index Technical Analysis: All eyes on next week

The US Dollar Index (DXY) is set to close this week in the red after a lacklustre performance. The Greenback was outmatched by the risk on sentiment that swept equity markets higher. Seeing the light calendar, it looks like not much movement will be taking place ahead of the weekend. Expect to see traders keep their powder dry for next week where almost every day a pivotal economic data number is set to move the needle. 

To the upside, the 100-day Simple Moving Average (SMA) near 104.07 is the first level to watch as a support that has been turned into a resistance. Should the US Dollar jump to 105.00, 105.12 is a key level to keep an eye on. One step beyond there comes 105.88, the high of November 2023. Ultimately, 107.20 – the high of 2023 – could even come back into scope, but that would be when markets reprice the timing of a Fed rate cut again, delaying it to the last quarter of 2024. 

The 200-day Simple Moving Average at 103.73 was broken on Thursday and should see more US Dollar bears flock in to trade the break for a weaker US Dollar. The 200-day SMA should not let go that easily, so a small retreat back to that level could be more than granted. Ultimately, it will lose its force with the ongoing selling pressure and could fall to 103.16 at the 55-day SMA. 

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.