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DXY Softens from Highs
The US Dollar is starting the first full trading week of 2025 on a softer footing with the DXY pulling back from YTD highs following a weaker-than-forecast ISM services print yesterday. Plenty to watch with the Dollar this week with the JOLTS job openings, and both the ADP and NFP employment readings due. Friday’s US labour market data will be the headline focus ahead of Trump’s inauguration on Monday Jan 10th.
Fed Expectations
Given the more hawkish tone from the Fed at its December policy meeting, traders have since scaled back Fed easing probabilities through Q1. CME pricing for March now shows a more than 50% chance of a hold. As such, there is plenty of two-way risk in USD into tier one data releases like the NFP this week. Strong readings and upside surprises will strengthen the view that the Fed is likely to keep rates steady, driving USD higher. However, any downside surprises should reinvigorate dovish expectations, leading rate-cut expectations higher and USD lower as a result.
Trump Inauguration
With Trump’s inauguration in sight, however, any downside moves in USD this week cold well prove short-lived. The general market view is still that USD is vulnerable to fresh upside (near-term, at least) as Trump takes office. His pro-growth and protectionist policies are expected to favour USD, along with ensuing safe-haven demand, meaning that Q1 could see USD firmly higher, particularly if strong US data argues against another Fed rate-cut.
Technical Views
DXY
The rally in DXY has stalled for now into the 109.35 level resistance. While price remains within the bull channel, and above the 107.25 level, however, focus is on a continuation higher and eventual breakout. Below there, 105.97 is the next support to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.