As the Federal Open Market Committee (FOMC) meeting looms closer on September 18th, the focus of finance traders and investors shifts to what lies ahead for the United States Dollar, with the potential for the first interest rate cut in years by the Federal Reserve. The market anticipation stems from the recent release of the Consumer Price Index (CPI) year-over-year inflation figure of 2.5%, fueling speculations on the Fed’s likely decision. The CME FedWatch tool indicates an 87% probability of a 25 basis points (bps) interest rate reduction, with the overall market sentiment leaning heavily towards a rate cut. While most investors bet on a 25 bps cut, a small fraction anticipates a larger 50 bps reduction, a viewpoint that has gained traction following the CPI data update.
In line with this outlook, a trading analyst shared insights on TradingView, projecting a potential crash for the U.S. Dollar index (DXY) based on the Elliott Wave theory’s third wave pattern. The analyst recommends a short position against the dollar, expecting it to perform poorly compared to the Euro (EUR) and the Japanese Yen (JPY). At present, the DXY is trading at 101.75.
Further analysis was sought from Meta’s advanced artificial intelligence model, Llama 3.1 Large, to shed light on the U.S. Dollar Index’s future trajectory amidst expectations of an interest rate cut. The AI foresees a weakening dollar trend, with a likelihood of consolidation leading up to the FOMC meeting. Notably, the scenario does not favor an interest rate cut, whether by 25 bps or 50 bps, potentially influencing the DXY’s movement.
In summary, the Meta AI predicts a target range between 100 and 100.50 as the most probable outcome, with the DXY possibly dropping to as low as 98 in response to a 50 bps rate cut. It is essential to note that the information presented should not be viewed as investment advice, as investing carries inherent risks that could impact your capital.