As the Federal Open Market Committee (FOMC) meeting approaches on September 18, traders and investors are eagerly anticipating the potential outcomes for the United States Dollar amid speculations of a significant interest rate cut by the Federal Reserve.
The release of the Consumer Price Index (CPI) year-over-year inflation at 2.5% has heightened market expectations regarding the Fed’s upcoming decision. Current projections from the CME FedWatch tool indicate an 87% likelihood of a 25 basis points (bps) interest rate reduction.
Market sentiment strongly favors a rate cut, with a 100% consensus. While the majority anticipates a 25 bps decrease, a minority of 13% envisions a larger 50 bps cut, indicating a notable divergence in opinions following the latest CPI data release.
Meanwhile, a trading analyst on TradingView has forecasted a potential crash for the U.S. Dollar index (DXY), citing the Elliott Wave theory and projecting a downward trend in the DXY’s performance. This analyst advises taking a short position against the dollar and anticipates its underperformance relative to the Euro (EUR) and the Japanese Yen (JPY).
Collaborating with Meta’s advanced artificial intelligence model, Llama 3.1 Large, insights into the implications of an interest rate cut on the U.S. Dollar Index have been sought. Meta AI foresees a weakening dollar, with a probable consolidation in the lead-up to the FOMC meeting but indicates unfavorable conditions for both 25 and 50 bps rate cuts.
The projected scenario suggests a target range of 100 to 100.50 for the DXY, although the index could potentially dip as low as 98 in response to a 50 bps interest rate decrease.
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