Today is the last day of October and the U.S. dollar ended in the red for the first time since May.
Has the U.S. dollar finally peaked?
Or did dollar bulls simply take a breather and will now push the currency higher into higher highs in November? 🤔
The U.S. dollar index (DXY) almost reached 115. Was that the top? Or will it hit 120?
The FX market was relatively quiet today but starting tomorrow, the rest of the week will be action packed with economic data releases and central bank meetings!
No need to panic though.
If you missed it, check out my “Week Ahead in FX” article I wrote earlier today that covers all the potential market-moving events this week.
The main event of the week will be the FOMC meeting and their interest rate decisions which will be announced on Wednesday.
The FOMC is expected to raise ratites by another 75 basis points (0.75%) but FX traders will be more focused on any comments providing hints on what they’ll do next month and beyond.
Currently, the market has already “priced in” a hike of 75 basis points this week and a hike of 50 basis points in December, which would bring the federal funds rate to 4.25-4.5% by end of 2022. And with a “terminal rate “of 4.95% by March 2023.
There are also market expectations that the Fed will hint that they’re thinking about slowing the pace of tightening in 2023.
How does JPow feel about this?
I’m not so sure that the JPow will agree with these expectations.
And if he doesn’t, expect the U.S. dollar to regain strength across all major currencies.
Not familiar with central banks and interest rates? Read our lesson on Why Interest Rates Matters to Forex Traders.
Let’s review what else happened in the FX market today…
Currency Market Movers
Which currency pairs gained the most today?
As shown by our FX Market Movers page, NZD/JPY was the leader of the pack, gaining 0.88% or 75 pips. 🙌.
Japan’s Ministry of Finance revealed today that they spent 6.3499 trillion yen ($42.8 billion) on currency intervention this month to prop up the yen. The threat of further interventions may keep a lid on JPY in the short term.
Which currency pairs lost the most today?
GBP/NZD.was the biggest loser, falling 1.26% or over 251 pips! 🔽
What was the overall strength or weakness of individual major currencies today?
Based on the Currency Strength Meter on MarketMilk™, NZD was the strongest currency. 💪
The British pound (GBP)) was the weakest currency.
The Bank of England (“BoE”) meets this Thursday. While the current market consensus is for a rate hike of 75 basis points (0.75%), there’s the potential scenario of them being more dovish than expected and only hiking by 50 basis points (0.50%). This would be very bearish for GBP so something to keep an eye on.
Currency Short-Term Trends
When it comes to short-term trend strength, the New Zealand dollar (NZD) shows the most bullish strength.
The Canadian dollar (CAD) looks to be gaining bullish strength.
The Japanese yen (JPY) and Swiss franc (CHF) are the most bearish trend strength.
The error (EUR) looks to be gaining bearish strength.
Which currency was the most volatile today?
Based on our Currency Volatility Meter, it’s the British pound (GBP).
Which currency pair was the most volatile today?
Given that the GBP was the most volatile currency, it has to be a GBP pair. But which one?
GBP/NZD. From its high to low, it moved over 1.51% or over 296 pips!
Are you bullish or bearish on NZD/JPY?
Is NZD/JPY a buy or sell?
Here’s what MarketMilk™ indicators say…