DXY Slides Throughout Powell’s Fed Testimony

US DOLLAR OUTLOOK: DXY INDEX PRICE PRESSURED AS FED CHAIR POWELL PLEDGES PATIENCE DURING CONGRESSIONAL TESTIMONY

• US Greenback power within the wake of final week’s Fed assembly continues to dissipate
• The DXY Index has fallen -0.8% from Friday’s swing excessive as bears unwind the rally
• Federal Reserve Chair Jerome Powell vows to not elevate rates of interest preemptively

The US Greenback is on tempo to shut Tuesday’s buying and selling session barely decrease gauging by the broader DXY Index. That is an extension of Monday’s modest drop as US Greenback power begins to fade with markets unwinding among the post-FOMC rally. On steadiness, the DXY Index is down about -0.8% from Friday’s swing excessive and has now retraced roughly one-third of final week’s buying and selling vary.

US Greenback softness over the past two buying and selling classes seemingly follows Fed Chair Powell downplaying the specter of tapering. Particularly, the Federal Reserve head undermined the significance of the most recent dot plot by stating it’s to be ‘taken with a grain of salt.’ FOMC officers projected two price hikes by year-end 2023 within the dot plot, which was significantly extra hawkish than what markets anticipated. However, the Fed’s Powell simply vowed throughout a congressional testimony that the central financial institution is not going to elevate rates of interest preemptively.

DXY INDEX – US DOLLAR PRICE CHART: DAILY TIME FRAME (11 FEB TO 22 JUN 2021)

Chart by @RichDvorakFX created utilizing TradingView

Powell additionally detailed in his ready congressional testimony remarks how “the Fed will do all the pieces we are able to to help the financial system for so long as it takes to finish the restoration.” That may imply persevering with to look via short-term rises in inflation whereas putting higher give attention to reaching its full employment targets. That stated, Powell talked about throughout his testimony how one of the simplest ways for the Fed to assist ease inequality and cut back financial disparity is by specializing in its jobs mandate.

Moreover, Fed Chair Powell acknowledged report low unemployment charges for non-white People as advantages of the lengthy financial enlargement into 2019. This might encourage FOMC officers to err on the aspect of warning by staying affected person with coverage whereas letting inflation and the financial system run scorching till full employment is reached. That might seemingly correspond with renewed bearish headwinds for the US Greenback. As such, the most recent extension greater by the DXY Index would possibly chalk as much as be a mere counter-trend rally.

Shifting focus to a every day US Greenback chart highlights how the Dollar has already begun drifting decrease from its latest swing excessive. This leaves the DXY Index trying to find nearside help as US Greenback bulls purpose to maintain the string of upper lows. The 200-day easy transferring common and 38.2% Fibonacci retracement stage stand out as technical boundaries with potential to assist preserve the US Greenback afloat. Beneath this space exposes the 90.60-price zone on the DXY Index, which underpins the pre-FOMC breakout stage.

US Greenback power would possibly resume, alternatively, if Fed taper fears are stoked by one other spherical of strong PMI information. Likewise, US Greenback bulls defending technical help may see the DXY Index recoil again towards its month-to-date excessive close to the 92.50-price stage. Invalidating the descending trendline that connects the 31 Could and 18 June swing highs has potential to invigorate an prolonged US Greenback rally and convey the 93.00-handle into focus.

Maintain Studying – Gold Worth to Recuperate if Fed Fee Hike Threat & USD Energy Ebb

— Written by Wealthy Dvorak, Analyst for DailyFX.com

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