Market Analytics and Technical Considerations
Key Points
Markets are monitoring China’s developments. The speech by Fed Chair Jerome Powell tomorrow and the release of Friday’s Nonfarm Payrolls are two additional significant risk factors. All things considered, the odds are encouraging for a Dollar rebound.
Geared for a hawkish Powell
Regardless of the fact that this could encourage China to accelerate its escape from Covid limitations – probably a risk-on event – investors seem to be drawn to the risk-negative story of potential instability in China.
Due to this week’s developments, which include tomorrow’s speech by Fed Chair Jerome Powell (in which we anticipate a higher possibility that he will sound hawkish) and strong US jobs data, the Fed’s expressed and perceived narrative may deviate from expectations for a dovish swing.
A 2Y10Y UST curve with a 75/80 bps flip indicates that there is a widespread belief that the Fed will continue tightening even as the economy enters a recession. The dollar’s worth ought to increase as a result of this.
As traders take defensive lines in anticipation of important developments late this week, we believe the dollar can gain some extra support today. It is possible for DXY to recover to the levels of 107.00/107.50 before Powell’s speech.
