USD Index Signals Change in Trend

• Dollar Index falls to 7-week low

The U.S. Dollar Index fell forcefully on Thursday to fresh post Brexit lows, as remote trade dealers analysed the minutes of recent meetings from the Federal Reserve and the European Central Bank for indications of a clear signal from the two national banks.

The Index, which measures the quality of the greenback against a group of six other major currencies, fell more than 0.6% to an intraday low of 94.05 on Thursday, its most minimal level since June 24^th. The record is on pace for its fifth consecutive losing session. Since hitting four-month highs in late-July, the U.S. Dollar has dove roughly 3.50% versus its principle rivals through the last three weeks. On a wider scale, the index has fallen by almost 5% since this year.

Speculators kept on responding to the hazy minutes from the Federal Open Market Committee's (FOMC) July meeting, which gave weak signs on whether the U.S. national bank could raise short-term interest rates before the end of the year.

With one of the biggest stories over the past few years being the strong dollar, it now seems that it may all be about to change, according to the latest technical analysis from Nautilus Investment Research's Tom Leveroni and Shourui Tian. "The US Dollar Index is poised to signal a major long-term trend change this week," they wrote in their note to clients.

According to data cited by Nautilus, “after crossing the 100-week moving average, the index fell by an average of 3.29% over the next three months compared to the typical performance of -0.02% over all three-month periods. A drop of that magnitude would push the index down to 91.91 from its current 94.38”.

While a few members of the FOMC felt that financial conditions would soon warrant "taking steps to remove policy accommodation," at the two-day meeting held on July 26-27, others judged that it is fitting to sit tight for further economic data on that will paint a clearer picture of price stability or instability in the U.S. as long-term inflation kept on hovering below the Fed's target objective of 2%. Not long ago, New York Fed president William Dudley said “the planning could be a good fit for extra fixing from the Fed, while leaving a potential September rate hike on the table”.

Any rate increase by the Fed for the current year will be seen as a bullish signal for the dollar as many financial markets participants will buy the greenback hoping to exploit the resulting higher yields. Then, on Thursday morning the European Central Bank released minutes for the Governing Council's July meeting, its first since the U.K. stunned investors with their surprising choice to leave the European Union towards the end June. At the meeting, policy makers examined schemes to "contain the political uncertainty" stemming from the Brexit outcome and to “clarify the outlook" for the future heading of the European Union. While underscoring that the Brexit gave a headwind to the financial markets, the Governing Council left its benchmark interest rates unaltered at zero in July for the fourth consecutive month