US Dollar Rallies Further on President Putin’s Warning, Fed Decision in View

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American dollar price and Chart Analysis

  • Putin “I’m not bluffing about nuclear weapons”.
  • US dollar back above 110 and aiming higher.

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The US dollar hit levels last seen two decades ago in early European trade while the greenback rallied after Russian President Vladimir Putin announced a partial military mobilization, raising fears of a further escalation of military action in Ukraine. Worryingly, President Putin has warned that he is not “bluffing” about the use of nuclear weapons in response to what he sees as Western aggression. Putin’s comments while raising fears may also indicate that the Russian president is worried about how the war in Ukraine is going, with some seeing his mobilization of up to 300,000 reservists as a sign that Russia’s military in Ukraine is severely depleted.

Breaking News: Mobilization Statement by President Putin Spooks Markets, Risk Off

T

he latest escalation in the Russia/Ukraine conflict took the focus off tonight’s FOMC monetary policy decision, but not for long. The Fed is fully expected to raise rates by 75 basis points tonight, with an outside chance of a whopping 100bp hike, while Chairman Powell’s subsequent comment and the quarterly Summary of Economic Projections (SEP) will be closely watched for any clues about the future path of US monetary policy.

You can follow the Federal Reserve’s decision and market implications in the link below.

Central Bank Watch: Fed Speeches, Interest Rate Expectations Update, September Fed Meeting Review

Russia’s aggression in Ukraine saw buyers flock to the safe haven US dollar today, boosting the value of the greenback. The US dollar has been pushed higher in recent months by rising US Treasuries and heightened expectations that the Fed will go strong in its fight against inflation, even at the cost of triggering a short-term recession. Interest-sensitive UST 2-year yields are currently at a 15-year high just under 4%, up from about 28 basis points a year ago.

US Dollar Rallies Further on President Putins Warning Fed Decision in View body Picture 1

For all market movement data and economic events see the real-time DailyFX Calendar.

Looking at the latest monthly DXY chart, there is very little technical resistance to prevent the US dollar from pushing even higher. The only note on the monthly chart is a set of old highs made between October 2000 and January 2002, which tops out at 121.29. That may seem like a stretch from the current level of just over 111.00 but there is nothing in the way. The monthly chart illuminates a strongly overbought signal and this may need to be washed out before the greenback moves higher.

Daily Price of US Dollar (DXY) – September 21, 2022

US Dollar Rallies Further on President Putins Warning Fed Decision in View body Picture 4

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