The US Dollar has been the strongest asset so far this year, even after the retreat of the last few months, as odds of the FED keeping up the pace of rate hikes went down after the slowdown in US consumer inflation CPI. The USD has remained the only safe haven, and it ios reacting to the news now. It broke below the 50 SMA (yellow) and the 100 SMA (green) on the daily chart which had been acting as resistance during this year’s bullish trend, so the trend seems in danger.

But, the 200 SMA (purple) held the decline so there is still hope for buyers. Yesterday we saw some bullish momentum in the USD after the stronger-than-expected US retail sales report for October. This means that the market is overly attached to the economic data and today’s Philly FED manufacturing will probably have a decent impact on the USD if it comes positive. So, we might see a bounce off the 200 SMA for the USD, as certain FED members still remain hawkish, giving mixed signals.

USD Dollar Index DXY – Can the 200 SMA Hold As Support?

DXY index looks well oversold on the daily timeframe

Fed’s Waller is on the wires saying:

• Recent data have made me more comfortable with ideas of 50 bp hike in Dec. and possibly to smaller corporate increases after that
• Will watch data between now and December before deciding on the next policy step
• We still have a ways to go on rates
• Will need to increase into 2023
• Monetary policy needs to be aggressive to reduce inflation.
• The higher the policy rate , the stronger the case for slowing to 50 bp hikes
• Fed policy is very restrictive territory
• Endpoint of Fed tightening the path is highly dependent on inflation data
• Fed will reach terminal rate well before inflation reaches 2%
• Labor market may be loosening, inflation pressure may be easing, but not enough to alter view of appropriate monetary policy
• Slowing in economic activities is a sign Fed actions to reduce inflation are working
• Looking for continued downward pressure core goods prices
• Moderation in CPI welcome, but I will not be head faked by 1 reports
• Will watch for moderation in shelter inflation, don’t expect it for at least several more months
• I believe we can expect wage growth to slow