US dollar shows who's boss, rallies back into bullish territory – by fx_ross DollarIndex Currencies Fed
A break of the 109.40s and 109.10s below there opens the risk of a significant downside extension.
However, while the DXY fell to a low of 109.257, it did not stay down there for long. The index has since rallied back to test the 109.70s which is encouraging for the bulls. Technically, the bulls will want to see 109.90 cleared before the week is out ahead of what is expected to be a hawkish Federal Reserve outcome next week.
''We think it would be very tempting for the Fed to hike 100 bp in order to underscore its inflation-fighting credentials and surprise the markets,'' the analysts said. ''Equities would tank but that's what the Fed wants. More importantly, the swaps market is now pricing in a terminal rate between 4.25-4.50%.''
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