The US dollar surged on Wednesday (May 22) after the Federal Reserve announced the minutes of the May FOMC meeting. The minutes raised concerns about continued inflation and indicated that interest rate cuts are unlikely in the near future. According to market analysis, against the backdrop of rising trading volume, the US dollar index is expected to challenge 105.74. This position is the nearly three-week high hit on May 9.
US Treasury yields rose as the minutes of the Federal Reserve meeting highlighted policymakers' doubts about cutting interest rates soon. Higher yields have boosted demand for the US dollar, reflecting the market's reaction to the Fed's cautious stance on inflation.
The minutes of the Federal Open Market Committee (FOMC) meeting from April 30 to May 1 show that market concerns about inflation persist. The minutes of the meeting showed that the Federal Reserve has not made significant progress in achieving the 2% inflation target. Several members of the committee discussed that if inflation does not fall as expected, further interest rate hikes may be needed.
The hawkish tone of the minutes suggests that the Federal Reserve may maintain higher interest rates for a longer period of time.
Chris Zaccarelli (Chris Zaccarelli), chief investment officer of the Independent Advisors Union, pointed out that “the official slogan is long-term growth,” emphasizing the Fed's commitment to controlling inflation.
According to the minutes of the meeting, many Federal Reserve officials emphasized the need to be patient in cutting interest rates.
Federal Reserve Governor Christopher Waller said that before considering cutting interest rates, more evidence is needed to show that inflation and economic activity have eased.
Boston Federal Reserve Chairman Susan Collins and Atlanta Federal Reserve Chairman Rafael Bostic also emphasized the importance of prudence.
Technical analysis of the US dollar
FXEmpire analyst James Hyerczyk said that the US dollar index rose at the end of Wednesday and hovered in a strong range of the 50-day EMA of 104.909, indicating that its strength is increasing recently.
Since the market successfully broke through the longer-term 200-day EMA (currently 104.376) late last week, potential bullish breakouts have been developing.
In addition to the 200-day EMA, another support level is the fluctuating bottom of 104.080. A successful break through the rebound, combined with rising trading volume, could eventually test 105.742 in the short term.
At 08:27 Beijing time, the US dollar index is now at 104.88.