USD, DXY - RSI Divergence After Fresh Yearly LowThe Fed leaned dovish last week with the 50 bp cut, also highlighting their expectation for another 50 bps of cuts into the end of the year. Initially the announcement brought out USD bears as DXY pushed down for a fresh yearly low. But shortly after the currency began to pare back those losses and it finished in the green for the day last Wednesday.
There was continued grind into the end of last week but notably, prior support structure had held after the false breakdown on Wednesday.
At this point, there's now a case of RSI divergence on the daily chart with the indicator setting a higher-low after that lower-low in price. This is on the heels of the oversold reading via RSI on the weekly in late-August.
The push point for this week is the Core PCE data set for release on Friday. And until we get to that, there will be multiple points of Fed-speak, such as we saw this morning with Austan Goolsbee. He sounded quite dovish and it wouldn't surprise me to hear more of the same. But the more interesting scenario here is if the USD continues to hold support even as the Fed speaks of more loosening.
EUR/USD would be one of the more attractive major pairs for USD-strength while GBP/USD and perhaps even USD/JPY are more attractive for scenarios of USD-weakness continuation. - js
