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The US Dollar (via DXY Index) is back at trendline resistance from the January 17 and February 8 highs following the release of the January FOMC meeting minutes yesterday. While the minutes themselves resulted in only a minor reaction initially, traders are quickly adjusting to the prospect of four rate hikes this year.
With that said, however, the line from the FOMC minutes that stuck out most was: “Members agreed that the strengthening in the near-term economic outlook increased the likelihood that a gradual upward trajectory of the federal funds rate would be appropriate.” St. Louis Fed President James Bullard reiterated this sentiment overnight, suggesting that the economy would have to be “perfect” in order to justify four rate hikes.
We’ll get more insight into policymakers’ thought processes throughout the day today with Dudley, Bostic, and Kaplan speaking over the course of the session. Given the light economic calendar for the United States – there are no ‘high’ importance events – it stands to reason that Fedspeak will be the most prominent catalyst for the US Dollar on the day.
Overall, the outlook for the DXY Index hasn’t changed: the key level traders still need to watch out for before a sincere bottom can be called is still 91.01.
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