Aug 17 (Lagos) - The Dollar displayed extreme signs of sensitivity on Tuesday with prices left vulnerable to heavy losses as expectations fluctuated over the Federal Reserve raising US interest rates in 2016.
Conflicting data such as the strong NFP and poor retails sales have placed the Dollar in a fierce tug of war with investor anxiety mounting ahead of Wednesday’s FOMC meeting minutes. Although US CPI for July remained unchanged at 0%, hawkish comments from the New York Federal Reserve President William Dudley on the possibility of a September hike successfully elevated the Dollar higher.
With Dollar sensitivity becoming a dominant theme, further explosive movements could be expected ahead of September’s FOMC meeting.
Investors may direct their attention towards the FOMC meeting minutes which could provide some direction on when the Fed may break the trend of central bank caution by raising US rates. In July financial markets were offered a breath of fresh air from the hawkish statement which amplified expectations over the Fed taking action.
The central bank acknowledged the stabilisation of US labour while domestic economic activity expanded at a moderate pace. If Wednesday’s minutes illustrate a similar stance, then Dollar bulls could be provided a lifeline to install a heavy round of buying.
From a technical standpoint, the Dollar Index is turning bearish on the daily timeframe as there have been lower lows and lower highs. Prices are trading below both the 20 and 50 SMA while the MACD has crossed to the downside.
Previous support around 95.50 could transform into a resistance which could encourage a steep decline back towards 94.00.