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  • The US Dollar steady while markets digest Trump’s odds increasing to become the next presidential candidate.
  • Markets brace for quite some headline risks ahead of the US Jobs Report on Friday.
  • The US Dollar Index still orbits around 104.00 though could be seen choosing direction after this week.

The US Dollar (USD) is trading very binary with mostly green against most major peers, in (Central) Europe and Commonwealth, while Asian currencies are a touch stronger than the Greenback this Monday, ahead of a very eventful week. Two main elements this week will be the hearing of the US Federal Reserve Chairman Jerome Powell, who is set to face Senator Elisabeth Warren and other politicians in Congress and the US Jobs Report on Friday. Meanwhile headline flow out of the Chinese National People’s Congress and US President Joe Biden’s State of the Union could trigger some intraday volatility. 

On the economic front, all eyes of course will be on the usual suspects ahead of the US Jobs Report with the ADP Nonfarm Employment number and the JOLTS Job Openings report on Wednesday. As always, no connection between ADP and Nonfarm Payrolls on Friday, though enough to create volatility besides the more than five US Fed speakers besides Jerome Powell that are due to release comments on the markets. 

Daily digest market movers: US pre-elections heading into main week

  • Former US President Donald Trump received green light from the US Supreme Court to remain on the voting ballots coming days after several states banned Trump from being on the ballots under a rare constitutional provision to bar revolters from running for office. 
  • A brief moment of stress when social media reported an object had crashed within the Polish boarder. After a few moments it turned out to be a weather balloon. 
  • Head of the Philadelphia Fed Patrick Harker is due to take the stage later this Monday around 16:00 CET. 
  • The US Treasury will head to markets to allocate a 3-month and a 6-month bill near 16:30 GMT. 
  • Japan’s Nikkei Index has breached 40,000 for the first time ever. 
  • Nikki Haley won the Columbia District (Washington DC) Primary, snapping the winning streak of former US President Donald Trump. 
  • A few elements to already note in your calendar for this week which could bear some important headline risk: 
    • China holds its National Party Congress from March 5 to March 11. Be on the lookout for any headlines on easing and stimulus support for Chinese markets. 
    • Super Tuesday is ahead as well with Primaries for both the Republicans and Democrats in 17 states. 
    • US President Joe Biden is due to release its State of the Union on Thursday. 
  • Equities are looking for direction with no real outliers to report. Only element worth mentioning in the far end of the risk spectrum is that Bitcoin is soaring near 4% this Monday. US equities open up in the red with the Dow Jones down over 0.50% and Apple facing a 1.8 billion EUR fine from the EU. 
  • According to the CME Group’s FedWatch Tool, expectations for a Fed pause in the March 20 meeting are at 97%, while chances of a rate cut stand at 3%. 
  • The benchmark 10-year US Treasury Note trades around 4.21%, roughly sideways seeing last week’s range. 

US Dollar Index Technical Analysis: Primaries not to be underestimated

The US Dollar Index (DXY) enters another week of being caught between what can only be described as the pitchfork of Simple Moving Averages (SMA). On the topside the 100-day SMA (104.63) is making sure the DXY does not escape any higher, while the 55-day SMA (103.51) makes sure the Greenback does not slip back to the lower levels of 2024. This week  is bearing more headline risk and events which could finally move the needle and stage a breakout either way for the DXY. 

To the upside, the 100-day Simple Moving Average (SMA) near 103.94 is being well respected this Monday. Should the US Dollar be able to cross  above it, to 104.60, 105.12 is the next key level to keep an eye on. One step beyond there comes 105.88, the high from November 2023. Ultimately, 107.20 – the high of 2023 – could come back into scope. 

Looking down, the 200-day Simple Moving Average at 103.74 has been broken a few times recently, though it has not seen a daily close below it last week, showcasing its importance. The 200-day SMA should not let go that easily though, so a small retreat back to that level could be more than granted. Ultimately, should it lose its force, prices could fall to 103.22, the 55-day SMA, before testing 103.00. 

Dot Plot FAQs

The “Dot Plot” is the popular name of the interest-rate projections by the Federal Open Market Committee (FOMC) of the US Federal Reserve (Fed), which implements monetary policy. These are published in the Summary of Economic Projections, a report in which FOMC members also release their individual projections on economic growth, the unemployment rate and inflation for the current year and the next few ones. The document consists of a chart plotting interest-rate projections, with each FOMC member’s forecast represented by a dot. The Fed also adds a table summarizing the range of forecasts and the median for each indicator. This makes it easier for market participants to see how policymakers expect the US economy to perform in the near, medium and long term.

The US Federal Reserve publishes the “Dot Plot” once every other meeting, or in four of the eight yearly scheduled meetings. The Summary of Economic Projections report is published along with the monetary policy decision.

The “Dot Plot” gives a comprehensive insight into the expectations from Federal Reserve (Fed) policymakers. As projections reflect each official’s projection for interest rates at the end of each year, it is considered a key forward-looking indicator. By looking at the “Dot Plot” and comparing the data to current interest-rate levels, market participants can see where policymakers expect rates to head to and the overall direction of monetary policy. As projections are released quarterly, the “Dot Plot” is widely used as a guide to figure out the terminal rate and the possible timing of a policy pivot.

The most market-moving data in the “Dot Plot” is the projection of the federal funds rate. Any change compared with previous projections is likely to influence the US Dollar (USD) valuation. Generally, if the “Dot Plot” shows that policymakers expect higher interest rates in the near term, this tends to be bullish for USD. Likewise, if projections point to lower rates ahead, the USD is likely to weaken.

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