• Wed. Feb 28th, 2024

The Dollar Is Experiencing Difficulties in Front of an Extraordinary Week

Leon Kramer

ByLeon Kramer

Dec 28, 2023

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The combination of reduced trading activity due to the holiday season, a shorter trading week, and a limited number of economic events suggests that we may observe atypical price movements in the final days 2023. Is there potential for the continuation of Santa’s rally? Is there a likelihood of continued downward pressure on the US Dollar?

Please find below the essential information for the upcoming week: 

The upcoming week’s economic calendar is expected to have a limited number of events. In addition, it is essential to note that during holiday periods with lower trading volumes, there is a higher likelihood of seeing little price movements. This can create an environment where false breakouts are more likely to occur. Many trading platforms may experience limited functionality on Mondays.

Equity prices experienced another week of positive performance. The Dow Jones Industrial Average achieved record levels, while there was a decline in US Treasury bond yields. The 10-year interest rate has reached a level of approximately 3.90%, which is the lowest it has been since July. Is Santa Claus anticipated to be present on Wall Street next week?

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Not All Indices Are Showing Growth

The US Dollar Index (DXY) experienced a decline for the second consecutive week, reaching monthly lows below the 102.00 level. The market’s trend remains bearish due to decreased investor appetite for risk and declining yields. Anticipated adjustments to market pricing by the Federal Reserve (Fed) in 2024 are exerting downward pressure on the value of the US dollar.

This week’s Core Personal Consumption Expenditure (Core PCE) experienced a 0.2% increase in November, falling short of the anticipated 0.3% growth. Compared to last year’s period, the Core PCE has risen by 3.2%.

The headline index experienced a decrease of 0.1% in November, which is the first instance of a negative reading since 2020. The available data supports that inflation is gradually approaching the Federal Reserve’s desired target of 2%. Next week, several important data releases will be in the United States.

On Tuesday, we will receive information regarding home prices. On Thursday, we will have updates on jobless claims. Finally, on Friday, we will receive the Chicago PMI data.

Analysis of the Situation by Major Currencies

The EUR/USD currency pair has surpassed the 1.1000 level, and the upcoming task for the following week will be to sustain its position above this threshold. The duo achieved the most significant weekly closing value in five months. On Friday, Spain’s preliminary Consumer Price Index (CPI) for December is an important economic indicator to watch out for.

The GBP/USD experienced slight weekly gains but struggled to maintain a position above 1.2700. Although the Pound showed some improvement against the US Dollar, it was impacted by the release of UK inflation data, which turned out to be weaker than anticipated. The EUR/GBP currency pair experienced an increase from 0.8575 to 0.8660, surpassing the 20-week Simple Moving Average. No upcoming data releases from the United Kingdom are scheduled for next week.

The Japanese Yen experienced the lowest performance compared to other major currencies during the week, which can be attributed to the Bank of Japan’s monetary policy meeting outcomes. The USD/JPY currency pair experienced slight value increases but ended the week significantly lower than its highest point at 142.50.

This suggests that more significant risks exist for the pair to decrease in value. The Summary of Opinions of the latest monetary policy meeting will be released by the Bank of Japan (BoJ) on Wednesday. The anticipated data from the country encompasses retail trade data and industrial production figures. The potential exit from the Bank of Japan’s hostile interest rate policy has raised expectations about the increasing relevance of Japanese economic statistics.

No significant economic reports are expected from Canada, Australia, or New Zealand. The AUD/USD and NZD/USD currency pairs experienced substantial gains for the second consecutive week, resulting in their highest closing levels since July. The ongoing movement of prices is anticipated to be influenced solely by the factors related to the United States dollar.

The USD/CAD experienced a significant decline, dropping below the 1.3300 level. This resulted in the lowest weekly closing price since August. The Canadian Dollar underperformed compared to the Australian Dollar (AUD) and the New Zealand Dollar (NZD) due to increased risk appetite and lower crude oil prices.

Gold Continues to Break Records

The price of gold achieved its second-highest weekly closing level in history. The XAU/USD currency pair trades at approximately $2,050, and the overall market trend indicates an upward movement. One potential concern for gold is the possibility of reassessing the Federal Reserve’s plans for monetary policy easing. An increase in US bond yields can cause a significant decline in the value of gold.

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Leon Kramer

Leon Kramer

Leon Kramer, a renowned financial author, enlightens Main Forex News readers with his deep understanding of currency markets. His years in global finance, combined with an intuitive grasp of trends, delivers insightful, up-to-the-minute foreign exchange analysis.

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