Dollar index trades flat around 101.00

There is a hush in the FX markets as investors are ready for a 25 basis point Fed rate hike, but fear a potential steeper Fed rate hike path in 2017.

There is a consensus in the market that the Fed would signal two rate hikes in 2017. However, the Fed could signal readiness to hike rates at a faster rate if Trump ‘walks the talk’ after taking office in January.

Moreover, the Fed policy is now less data dependent and more ‘fiscal policy dependent’.

Dollar Index Technicals

Monday’s candle was an ‘outside day’/bearish engulfing candlestick, which is a reversal pattern. A break above 101.16 (previous day’s high) would open doors for a re-test of 101.78 (Monday’s high). Only a daily close above 101.78 would negate the reversal as suggested by Monday’s ‘outside day’ candle.

On the lower side, a breach of 100.75 (previous day’s low) would open doors for a sell-off to 99.85 (Dec 5 low) and 99.43 (Dec 8 low).