The US Dollar Index (DXY), which measures the USD’s value against a basket of currencies, is trading within a very tight range on Friday. It’s holding close to the 108.00 mark.
Muted Trading Conditions
Markets are cautious, and the thin year-end trading conditions are keeping volatility low. Even though there’s been incoming data from Japan and China that hinted at further industrial slowdown, the US Dollar’s strength continues. Also, despite some profit-taking after last week’s gains, the US Dollar is still climbing as traders come back from the Christmas holidays.
Daily Digest of Market Movers
Government Shutdown Risk
The risks of a government shutdown have gone up because House Republicans didn’t manage to pass a funding deal. But historically, short shutdowns haven’t had a huge economic impact. And the Treasury has some room to act before any default risk gets worse.
Yield Increases
Longer-term yields are going up. The 10-year Treasury yield is hovering near 4.60%, and the 30-year is at 4.77%. Both are testing highs that we haven’t seen since May.
Anticipated Growth and Fed Stance
The US Dollar is on track to have a nearly 7% annual gain. Traders expect strong US growth and think there will be limited rate cuts in 2025. Fed Chair Jerome Powell has signaled caution about further easing, which is helping the Dollar stay strong.
Chinese Market Developments
Chinese stimulus measures and deposit rate cuts have given support to local markets. But the US Dollar isn’t affected by these. It’s still being widely bought as the year comes to an end.
DXY Technical Outlook
Bullish Momentum and Indicators
The Dollar Index is keeping its bullish momentum. The indicators are pointing higher and are getting close to overbought levels.
Liquidity and Positive Technical Picture
Even with thin trading liquidity, the DXY is still moving up bit by bit near the 108.00 mark. As long as the index stays above 106.00, the technical situation looks positive.、
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