As the countdown to the Federal Open Market Committee (FOMC) meeting on September 18 continues, traders and investors in the financial sphere are curious about the future trajectory of the United States Dollar. The potential for the Federal Reserve’s first interest rate cut in years heightens this anticipation.
Today’s release of the Consumer Price Index (CPI) showing a year-over-year inflation rate of 2.5% has sparked speculation regarding the Fed’s impending decision. The CME FedWatch tool indicates an 87% likelihood of a 25 basis points (bps) interest rate reduction.
The market sentiment heavily leans towards a rate cut, with a 100% probability assigned to this outcome. While only 13% of investors are optimistic about a 50 bps drop to a target range of 475 to 500 bps, the interest in such a significant reduction has grown over time, notably following the latest CPI data.
In a unique analysis on TradingView, a trading analyst predicts a forthcoming crash in the U.S. Dollar index (DXY). This forecast is based on the third wave of the Elliott Wave theory, signaling a downward trajectory for the DXY. The analyst recommends taking a short position against the Dollar, projecting weaker performance compared to the Euro (EUR) and the Japanese Yen (JPY). The current DXY trading level stands at 101.75.
Seeking additional perspectives, Finbold reached out to Meta’s advanced artificial intelligence model Llama 3.1 Large for insights into the potential movement and price forecast of the U.S. Dollar Index post an interest rate cut. The AI model foresees a weakening Dollar, with possibilities of consolidation in the run-up to the FOMC meeting. However, this scenario does not align with an interest rate cut of either 25 or 50 bps.
According to Meta AI, the most probable target range for the DXY is between 100 and 100.50, although there is a chance of it dropping as low as 98 if a 50 bps interest rate cut is implemented.
Please note that the information provided in this article should not be construed as investment advice. Investments carry inherent risks, and caution should always be exercised.