US Dollar Faces Key Test at 2-Month Lows: What's Next for the Greenback?
After experiencing its sharpest weekly decline since July last week, the US dollar kicked off the new week by sustaining its downward trajectory.
Today, DXY dropped to its lowest level in the last 2 months, reaching as low as 103.6, while concurrently generating bearish signals based on recent economic developments.
Following lower-than-expected inflation data last week, investor sentiment has solidified around the belief that the Fed is done raising rates.
Consequently, the market has shifted its attention to when the Fed might start interest rate cuts.
Despite recent dovish remarks from Fed officials supporting a softer dollar, market pricing does not fully incorporate officials' statements indicating a potential reactivation of tightening policies when necessary.
As the perspective that the Fed will transition to a pivot interest rate phase gains traction, there are still some suggestions that the Fed might start cutting rates sooner, impacting risk appetite.
Simultaneously, tomorrow's release of the minutes from the Fed's last meeting, where interest rates remained unchanged for the second time, is anticipated.
Given the trends from last week, the impact of the meeting minutes on the US dollar is expected to be limited.
DXY, which demonstrated stability in October despite escalating geopolitical issues, has now entered a downward trend due to the increase in risk appetite as regional tensions expand and news flow decelerates.
Technically speaking, the dollar remained horizontal for a month in the September-October period and then entered a correction trend.
The index, which tried to hold on to 105 support for a while, lost its support in the 104.2 band after last week's sharp decline and is moving towards the main
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