27 Nov 2024

The US Dollar is experiencing a decline as the final regular trading day of the week commences. In light of the upcoming Thanksgiving and Black Friday events, Wednesday is set to unveil three days' worth of economic data. The US Dollar Index continues its correction this week, dropping below 106.50 on Wednesday.

The US Dollar (USD) is experiencing a decline against most major currencies in the foreign exchange markets. The US Dollar Index (DXY), which measures the value of the Greenback against six key currencies, has continued its downward trend this week, dropping below the 106.50 mark. The publication of the Federal Open Market Committee (FOMC) Minutes on Tuesday did not significantly impact market movements, revealing that several members of the Federal Reserve (Fed) are in favor of either another rate cut in December or a pause in the current cutting cycle. The absence of any discussion regarding a rate hike should provide reassurance to the markets concerning the Fed's decision in December.

On Wednesday, the US economic calendar is particularly busy, as three days' worth of data will be released in a single trading session ahead of the Thanksgiving holiday. The most critical data point is the Personal Consumption Expenditures (PCE) Price Index for October, which is the Federal Reserve's preferred measure of inflation and may influence expectations regarding interest rates for the upcoming Fed meeting in December. In addition to the PCE data, reports on Durable Goods Orders for October, revised estimates for Q3 Gross Domestic Product (GDP), and Initial Jobless Claims for the week ending November 22 will also be published.

Daily digest market movers: Set your alarm for 13:30 GMT

At 13:30 GMT, market participants will be closely monitoring their screens for significant economic data releases pertaining to the US economy. The key reports to watch include:

A revised estimate of the US Gross Domestic Product (GDP) for the third quarter, with the headline GDP anticipated to hold steady at 2.8%. The Price Index component is projected to remain unchanged at 1.8%, while the Personal Consumption Expenditures (PCE) segment is expected to stay at 1.5%.

Additionally, Weekly Initial Jobless Claims are forecasted to increase to 217,000 for the week ending November 22, up from 213,000 the previous week. Durable Goods Orders for October are expected to rise by 0.5%, following a contraction of 0.7% in the prior month. Excluding transportation, goods orders are anticipated to grow by 0.2%, down from the previous increase of 0.5%.

At 15:00 GMT, the Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures (PCE) for October, will be released. The monthly headline PCE is expected to show a steady increase of 0.2%, while the core PCE is projected to reflect a similar trend with a growth of 0.3% compared to the previous month. On a year-over-year basis, headline inflation is anticipated to rise to 2.3% in October, up from 2.1% the month prior, with the core PCE estimated to increase by 2.8%, surpassing the earlier figure of 2.7%.

Equity markets are displaying mixed results, with Chinese markets outperforming their global counterparts. The Chinese Hang Seng index closed with gains exceeding 2% for the day, while European equities and US futures are trading in negative territory.

The CME FedWatch Tool indicates a 66.5% probability of a 25 basis points (bps) rate cut by the Federal Reserve at the meeting scheduled for December 18, with a 33.5% likelihood that rates will remain unchanged. The recent Fed Minutes have contributed to an increase in the odds for a rate cut in December.

The US 10-year benchmark yield is currently at 4.27%, significantly lower than the peak of 4.50% reached two weeks ago on November 15.

US Dollar Index Technical Analysis: Mixed Signals  
The US Dollar Index (DXY) is experiencing a slight decline as it approaches the final significant data release of this disrupted week, coinciding with the upcoming Thanksgiving holiday. Seasoned traders recognize that trading based on the forthcoming economic data will be challenging due to numerous factors affecting the trajectory of the Greenback and other asset classes. Additionally, it is worth noting that the Greenback has enjoyed a substantial rally, with US traders likely looking to realize profits before the holiday festivities.  

The recent peak of 108.07 reached on Friday represents the initial resistance level to overcome. Following that, the significant psychological barrier at 109.00 is the next target. The support level established in October 2023 at 109.36 is also a critical point to monitor on the upside.  

On the downside, support is identified around 106.52, corresponding to the double top formed in May. A bit lower, the crucial level of 105.53, which marks the high from April 11, should help prevent any declines towards 104.00. If the DXY were to drop to 104.00, the significant figure and the 200-day Simple Moving Average at 103.98 are expected to provide support against further declines.