50 Basis Point Cut?

The US Federal Reserve will reduce its target on the funds rate tomorrow, but whether the central bank opts for a 25 or 50 basis point reduction is difficult to say. Market pricing is leaning in favour of the latter (65% probability). Consequently, price action could be choppy heading into the event.

Range Support on the Radar

The US Dollar Index – measures the US dollar’s (USD) value versus six major international currencies – is currently testing the mettle of a daily support level at 100.60. Since late August, you will note that buyers and sellers have been carving out a range between the noted support level and resistance coming in from 101.78. This follows an almost one-sided bearish market since topping at 106.13 in late June and the 50-day simple moving average (SMA) at 102.67, crossing beneath the 200-day SMA at 103.83 on 27 August (Death Cross).

Technical studies suggest that the current support level is vulnerable to the downside. This is based on the monthly chart demonstrating scope to push south towards support at 99.67, a base complemented by the 50-month SMA at 100.02, as well as Fibonacci support around 98.72. The current daily range support is essentially the last line of defence that stops monthly price from reaching the monthly support area.

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