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I hope you had a great weekend and are ready for an interesting trading week.

Trump is set to speak with Putin, so there is a possibility of a successful ceasefire that could potentially end the war between Russia and Ukraine. More importantly for the FX markets, we have four major central bank rate decisions this week: the Fed, Swiss National Bank, Bank of England, and Bank of Japan. These announcements will likely bring significant volatility, with the main focus on the Fed decision on Wednesday. Expectations are for the Fed to remain on hold, but they could still surprise by sounding more dovish, especially if they aim to stabilize the markets. Plus, last week’s inflation data came in lower than expected at 2.8% versus the anticipated 2.9%, which could play an important role for Powell to be dovish this week. Lower inflation could keep US yields and the dollar in a downtrend while also helping stabilize the stock market.

DXY 1H Chart

Looking at the dollar index Elliott wave structure, prices are still in wave four, which could retest higher resistance levels around 104.30 to 104.80. I don’t expect Monday to be the breakdown day for wave five, so there is still time for a more complex and deeper wave four before the next move lower.

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