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Currency Analyst since 2010

US dollar: outlook for September 26-30

During the past week US dollar index declined from 96.00 to the levels just above 95.00. The main event for the greenback was the Federal Reserve’s meeting.  

The central left the federal funds rate unchanged in the current range between 0.25% and 0.50%, but signaled it could still tighten monetary policy by the end of 2016. At the same time, the Fed projected a less aggressive increase in rates next year and in 2018, and cut its longer-run interest rate forecast from 3.0% to 2.9%.

On the one hand, the Fed still looks likely to raise rates in December and this fact provides support for the US dollar. According to futures market, the probability of such outcome accounts for 52%. On the other hand, the lower projected path for interest rate hikes in the US decreased the overall demand for the greenback.

All in all, few traders expected the Fed to raise rates in September, and so the market wasn’t very disappointed by the central bank’s decision not to do so. The depreciation of the greenback was rather modest. There are reasons to believe that sideways dynamics of the US currency will continue. Support for USD index lies at 94.75 (2016 support line), while resistance is around 96.00.

Next week America will release several important economic indicators – new home sales on Monday, CB consumer confidence on Tuesday, core durable goods orders and crude oil inventories on Wednesday, final Q2 GDP and unemployment claims on Thursday and core PCE price index, personal spending and consumer sentiment on Friday. Moreover, we’ll hear more comments from the Fed: FOMC members Bullard and George will speak on Wednesday and FOMC member Powell and Fed Chair Janet Yellen will take the floor on Thursday.    

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