The key event of the week will take place on 10 December – at 22:00 GMT+3 the FOMC will publish its interest rate decision, followed half an hour later by a press conference with Jerome Powell.
As the chart of the dollar index (DXY) shows, the US dollar is weakening as the event approaches, reflecting market sentiment – the rate is expected to be cut by 25 basis points due to pressure from Trump and a cooling labour market. This underpins the bearish trend that has been in place since late November.
A reminder that on 24 November we:
→ highlighted the importance of resistance around 100.20 points;
→ and constructed a system of two trend channels.
Since then, the price has moved lower within the descending channel, and:
→ new swing points have allowed us to refine the channel boundaries;
→ a large bearish double-top pattern (A–B) has formed on the chart above the psychological level of 100 points.
The dollar index chart indicates that selling pressure is dominant (as shown by the arrows):
→ the lower boundary of the ascending channel has switched its role from support to resistance;
→ a similar role reversal has occurred at the 99.11 level.
Today, the DXY index is near the lower boundary of the descending channel. It is reasonable to assume that in the short term:
→ the market will enter a wait-and-see mode ahead of the news;
→ a consolidation zone may form on the chart, supported by the lower boundary of the red channel.
Be prepared for surges in volatility on the currency markets on Wednesday evening.
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