27 Dec 2013
DXY still defying the “taper-hawks” by failing to break out to the upside
FXstreet.com (Barcelona) - The DXY remains stuck below key “correction resistance” at 80.72. The fact that it has not broken out to the upside following the Fed’s tapering announcement of two weeks ago is causing chatter about what could be weighing down the greenback.
DXY watchers to bide time until next week
Those closely watching the behavior of interest rates and the US Dollar have had plenty of time during this holiday season to obsess on whether the expected reaction of higher rates and a DXY would actually occur following the commencement of the QE-tapering by the FOMC in the US. Reasons put forth for the lack of upside momentum in rates and the DXY include:
• The Fed is simply sticking to the economic keys they have noted previously – US employment and inflation data – with employment still problematic and inflation non-existent right now
• There exists some bearish economic data the Fed has that the public does not
• There is something very scary looming on the geo-political front – although this is discounted since stocks are still on the rise
• The Fed is reticent to be too draconian with their tapering initiatives with the unknown side-effects of the implementation of the Obamacare program in 2014
• The Fed is beginning tapering, but only in name only as they know they must keep interest rates in check for as long as possible to keep their debt-service costs as low as possible given the massive debt and deficit problems the US faces.
The real reason for the sluggishness of rates and the DXY will reveal itself in time, but the potential bubbles that are being inflated will continue to become a source of concern for astute market observers. The question for traders surrounds the appropriate timing of betting on those bubbles bursting.
Technical outlook for the DXY
Technicians say the DXY may have set a short-term low at 79.75 support on December 11th. Below that level, there is additional support at 79.63 and at the ultimate “line in the sand” at 79. Resistance for DXY comes in at ST “correction resistance” at 80.72 and is followed up by a round number level at 81 and is backed up further by the horizontal line at 81.50. The ultimate target for DXY for this move higher should – according to DXY bulls – be 86.92 in the long-term (so get ready, if 80.72 is broken, for whatever ramifications that may bring to the other asset classes).
DXY watchers to bide time until next week
Those closely watching the behavior of interest rates and the US Dollar have had plenty of time during this holiday season to obsess on whether the expected reaction of higher rates and a DXY would actually occur following the commencement of the QE-tapering by the FOMC in the US. Reasons put forth for the lack of upside momentum in rates and the DXY include:
• The Fed is simply sticking to the economic keys they have noted previously – US employment and inflation data – with employment still problematic and inflation non-existent right now
• There exists some bearish economic data the Fed has that the public does not
• There is something very scary looming on the geo-political front – although this is discounted since stocks are still on the rise
• The Fed is reticent to be too draconian with their tapering initiatives with the unknown side-effects of the implementation of the Obamacare program in 2014
• The Fed is beginning tapering, but only in name only as they know they must keep interest rates in check for as long as possible to keep their debt-service costs as low as possible given the massive debt and deficit problems the US faces.
The real reason for the sluggishness of rates and the DXY will reveal itself in time, but the potential bubbles that are being inflated will continue to become a source of concern for astute market observers. The question for traders surrounds the appropriate timing of betting on those bubbles bursting.
Technical outlook for the DXY
Technicians say the DXY may have set a short-term low at 79.75 support on December 11th. Below that level, there is additional support at 79.63 and at the ultimate “line in the sand” at 79. Resistance for DXY comes in at ST “correction resistance” at 80.72 and is followed up by a round number level at 81 and is backed up further by the horizontal line at 81.50. The ultimate target for DXY for this move higher should – according to DXY bulls – be 86.92 in the long-term (so get ready, if 80.72 is broken, for whatever ramifications that may bring to the other asset classes).