US Dollar Price Volatility Report: Dovish Fed Bets Firm, Liquidity Up

US Dollar price action is currently gravitating slightly above confluent support provided by the DXY Index’s 50-week simple moving average as well as the 23.6% Fibonacci retracement level of its trading range since the greenback’s February 2018 swing low. Yet, aggressive selling across major USD currency pairs over the last several days pushed the US Dollar Index below rising trendline support that connects the series of higher lows recorded early last year to the higher swing low printed this past June, which also appears to form a rising wedge chart pattern.

US DOLLAR INDEX PRICE CHART: WEEKLY TIME FRAME (OCTOBER 02, 2017 TO OCTOBER 21, 2019)

(Click on image to enlarge)

US Dollar Index Price Chart Outlook Technical Analysis

Chart created by @RichDvorakFX with TradingView

That said, if the 50-week SMA fails to keep the US Dollar afloat, the DXY Index has potential to sink even lower toward the 96.00 handle and approach confluent support near its 100-week exponential moving average and 200-week SMA. Moreover, the RSI remains below 50 and the magnitude of bearish divergence has gained pace as indicated by the MACD amid lingering USD weakness.

FED INTEREST RATE CUT PROBABILITIES (OCTOBER 2019)

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FOMC Interest Rate Cut Expectations October 2019 Chart

The Federal Reserve (Fed) is officially in its blackout period where FOMC officials are restricted from commenting on monetary policy and the economy in the runup to an upcoming interest rate decision. The Fed is expected to meet at the end of the month following back-to-back interest rate cuts at the July and September Fed meetings.

According to overnight swaps, traders are currently pricing in an 87.3% probability that the FOMC cuts rates for a third consecutive meeting, which would lower the Federal funds rate (FFR) to a target range of 1.50-1.75%. This is up considerably from the 60.5% probability priced in earlier this month – even despite positive fundamental developments like the supposed ‘phase 1 US-China trade agreement.’

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