ATFX FX Market:The Federal Reserve minutes hit the dollar index, and the market price retreatedbelow
At 3:00 a.m. today, the Federal Reserve released the minutes of its meeting, which mentioned:
Job growth has slowed since the beginning of last year, but remains strong, with the unemployment rate remaining low;
Inflation has eased over the past year, but remains above the Committee's 2% inflation target;
continued reduction of the Fed's holdings of U.S. Treasuries and agency debt, as well as agency mortgage support**;
The current monetary policy stance is restrictive and will continue to exert downward pressure on economic activity and inflation.
Federal** interest rates may have peaked, but there are risks associated with easing monetary policy stance too soon.
Judging from the above, the minutes of the meeting were neutral, which not only affirmed the good performance of inflation and unemployment, but also hit market participants' expectations that the interest rate cut operation will be launched soon. The yield on the 10-year Treasury note was 4 yesterday323% as of today's market price of 16:30 43148%, the fluctuation range is very small, and it is not significantly affected by the meeting minutes, which proves the judgment that the overall statement of the meeting minutes is neutral. As of 16:15 today, the U.S. dollar index fell 053% with a market price of 10400** to the latest price 10349, the performance is relatively weak. Why did the relatively neutral minutes hit the dollar index so significantly? We believe there are several reasons for this:
First, the dollar index is not strongly correlated with the release of the minutes. From 3:00 a.m. to 3:05 a.m., the U.S. dollar index fluctuated violently at the minute level, with the five-minute level at the highest 10411, the lowest price is 10394, the fluctuation amplitude is abnormally amplified compared with the surrounding **. After 3:05, the dollar index entered a sideways** state, by which time the impact of the minutes had largely faded. It was not until 12:00 today that the dollar index started a unilateral ** trend, and 9 hours after the release of the minutes. Due to the long time apart, the logic of the interaction between the minutes and the dollar index does not hold water.
Second, a neutral statement is better than a hawkish statement. Before the release of the meeting minutes, the mainstream expectations of the market have been bearish on the "interest rate cut expectations", believing that the US macroeconomic data is strong and the probability of interest rate cuts is not high. In particular, former US Treasury Secretary Summers said last week: "The probability that the Fed will raise interest rates next remains present, and this probability could be 15%. "This has exacerbated the panic among dollar bears. Although the Fed minutes denied the possibility of premature interest rate cuts, there were also expressions such as "slowing job growth", "easing inflation", and "downward pressure" that were conducive to the rise in interest rate cut expectations. Therefore, the neutral minutes of the meeting dealt a blow to the previously hawkish market expectations, and the dollar index naturally gave up some of its previous gains.
Second, there is a need for technical adjustment in the US dollar index in the short term.
From a technical point of view, the medium-term trend of the US dollar index is moving out of the ascending channel, especially today's long black candlestick, causing the market price to fall back outside the channel. If the pullback does not bottom out soon, the ** band may come to an end. The reading of the indicator KD has not yet reached the oversold territory, which means that there is still plenty of room. The MACD indicator's bar is below the zero line, which has just broken below it, which means that the short- to medium-term trend is bearish. Overall, most indicators believe that the short-term** trend of the dollar index will continue.
ATFX Risk Warning, Disclaimer, Special Statement: The market is risky, and investment should be cautious. The above content is the opinion of the analyst and does not constitute any operational advice. Please do not rely on this report as the sole reference. Analysts' views are subject to change at different times and will be updated without notice.