Will Fed Rate Decision Lift US Dollar Index off Four Month Lows?


A more technical look at the markets from InterTrader

The US Dollar spread betting index has been dealt a hefty blow in the past week, diving to four month lows on Friday after a disappointing Non-farm Payrolls figure.

This has sent the FX spread betting market to the 80.00 area, where it is currently trading.

With the Fed’s rate decision scheduled on Thursday, it looks like this is a make or break week for the greenback.

With a large scale easing program widely expected and extensively priced in, it is clear that the market has high expectations from the Fed both in terms of scope and influence.

Considering the S&P 500‘s four year high, gold’s surge above $1,700 and the dollar’s sharp tumble to multi-month lows, it appears that meeting expectations is difficult enough.

Beating them could be near impossible and opens the door for disappointment, sharp selling of risky assets and a (potentially) sizable rally for the dollar.

US Dollar Index Chart
US Dollar Index Chart


The technical set up reinforces the idea that the bears could be running out of steam.

The MACD signal line, which has been trading steeply below the signal line since the beginning of the month on the 4-hour-chart, is now turning flat.

This indicates the downtrend may be losing its momentum.

With the RSI in the oversold area, the market could be poised for a turn upwards.

Key levels for the bulls to watch come at 81.71 and 82.93.

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Good luck and happy trading

Dafni Sedari, InterTrader

(Original article written 11 September 2012).