12/16/2021

A major end-of-the-year announcement from the FOMC yesterday waved a big bullish flag for the USD. Several factors were discussed in the conference including interest rates, inflation and tapering. Here is why 2022 could be a fantastic year for the currency:

Tapering Begins

The Fed decided to double the amount of asset purchases to a rate of $30 billion per month. By the month of January, they will only be buying $60 billion compared to what used to be $120 bn, and by March, the Fed should have reduced their purchases to nothing. This quick reduction of purchases will then be followed by rate hikes.

Fed Calls For 3 Hikes In 2022

After the Fed tapers in the early half of 2022, they will follow it up with three interest rate hikes which will likely equate to 0.75 basis points in total for the year. Although this is bullish news for the USD, it is still not set in stone with the concerns of omicron virus still lingering. Virus fears will likely persist in 2022, so the expectations of three hikes may be quelled if the problems with this strain gets worse. But, at least two seem promising for next year. These raises will help fight the CPI inflation factor that has risen 6.8% in the last month.

DXY

The US dollar index came a little off the highs around $96.9, but looks like it wants to come back up to that level once again. Price may have made a wedge formation on the 1D chart as higher lows and lower highs are taking shape. Support lies below at 95.545 and 94.600.