Daily Market Analysis and Forex News
USDInd hits 3-month low. More room to fall?
- Dollar weakened as markets raise bet on Fed rate cuts in 2024
- USDInd approaches key support levels around 103 region
- Daily close below 103 region could spark another 1,300-point drop
- Other technical indicators suggest 350-point rebound ahead
- FOMC meeting minutes later today may spark more volatility
The USD index has fallen by some 4000 points since its November 1st intraday high.
There may be little ahead to cheer for the index, given current market expectations that the US Federal Reserve may start to cut interest rates as early as May 2024.
Recall that greater expectations for lower interest rate cuts tend to translate into a weaker currency.
At the time of writing the US Index is approaching a convergence of support levels:
- 103.000: an important round number level
- 102.910: the 261.8 Fibonacci level
The Fibonacci levels are taken from the 29th September low to the 3rd October high.
A daily close below these levels could see the index fall further to 101.900 to trade around its lowest since August.
USDInd may see 350-point technical rebound soon
From an Elliot wave perspective, the USDInd D1 is in its 5th impulse wave of the decline from 107.914 posted on November 1st.
Based on the Elliot wave theory, wave 5 is usually followed by a correction with sequence A-B-C coming in different forms.
If the key support levels around 103.00 hold, we may see the index bulls come in for a counter trend move back up to its 200-day moving average.
Note also that the Relative Strength Index (an indicator that shows us extreme buy and sell zones) is teetering at the 30-point level.
If the RSI falls below 30, it becomes technically oversold.
Such a technical event would increase the probabilities of a rebound.
However, the Average Directional Movement Index (an indicator that shows us the strength of the trend) is pointing upwards.
This means that the downward bias for the USDInd remains strong.
This could spell an extended decline in the USDIndex, until we see a peak in the ADX signaling weakness in the current bearish strength.
What could move USDInd today?
With FOMC meeting minutes due at 7:00 pm GMT tonight, traders and investors around the world are looking for confirmation that peak US interest rates is truly here.
In other words, markets want to know whether the Fed is truly done with its rate hikes for this cycle.
If so, that could send the USDInd to a fresh 3-month low.