FX.co ★ US dollar is waiting for the Fed's emergency meeting

Experts recorded a surge in the "bearish" mood on the US dollar last Friday. Following the Fed's decision on the rate, the US dollar soared and then declined. It is still far from stabilizing. An unscheduled meeting of the regulator is on the agenda today.

According to analysts, an emergency meeting of the Fed's representatives, related to the issue of an early rise in interest rates, may push the US dollar down. However, the dynamics of this currency managed to turn upwards.

Based on the dollar index (USDX) current data, the bearish mood on the US currency strengthened last Friday. At the start of the new week, experts recorded a noticeable confrontation between the bulls and bears. Their forces are currently equal, but the scales are leaning towards the bears. The "bearish" sentiment in the EUR/USD pair is likely to strengthen again if the mirror level of 1.1329 breaks down. According to experts, breaking through it will open the way to the levels of 1.1283 and 1.1232.

The implementation of the opposite scenario will lead to the pair settling in the current range of 1.1329-1.1353. On Monday morning, the EUR/USD pair was trading at the level of 1.1349 in anticipation of news from the Fed. The euro made timid attempts to rise, acting with varying success.

On Monday, the Board of Governors of the US Federal Reserve will hold an unscheduled closed meeting on an expedited basis, following which a revision of the advance rate and discount rate is possible. The regulator is ready to urgently raise rates to prevent a rapid unwinding of the inflationary spiral. The reason for such a rush is the soaring inflation rates, which accelerated to a new 40-year record according to the statistics.

It can be recalled that the regulator held a meeting on a similar topic in November 2015, where the federal funds rate was raised by 0.25% three weeks later, and by another 2% in the next three years. The end of this cycle of rate hikes was the collapse of key US stock indices.

At the moment, currency strategists fear a similar scenario. The reduction of positions on the growth of the USD on the part of the leading market players also adds pressure. At the same time, many large funds reduced greenback purchases by 8%. The continuation of the current negative trend contributes to the US dollar's decline.

Experts emphasize that the US currency should grow in the current conditions, but this does not happen. The reason is the aggressive "bullish" strategy in USD futures, recorded among major players. This trend has softened slightly this month. However, the "bullish" positioning for the US dollar remains at its high for the last two years, which does not allow it to rise. Over the past week, the bullish index of major players (i.e., the ratio of the number of contracts to buy USD to the number of contracts to sell) surged by 1.40 in a week, namely to 6.11 points.

According to analysts, a sharp rise in rates will bring down the US economy and lead to hyperinflation. Economist John Williams, head of alternative statistics website ShadowStats, said that real inflation in the US has reached an impressive 15%. In a similar situation, currency strategists at Goldman Sachs expect the Fed to raise rates seven times by the end of this year.